Briefing.employment Benefits in the European Union.2007!05!01.Clifford Chanse LLP.eng.Andisb Agrisr

Employment and Benefitsin the European Union

Em

plo

ym

ent a

nd

Benefits

in th

e E

uro

pean U

nio

n

ContentsClifford Chance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Clifford Chance Offices Worldwide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Austria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Belgium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Bulgaria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

Cyprus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29

The Czech Republic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35

Denmark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45

Estonia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53

Finland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58

France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64

Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .72

Greece . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .84

Hungary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .90

Ireland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .96

Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .104

Latvia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .112

Lithuania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .118

Luxembourg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .125

Malta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .135

The Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .142

Poland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .151

Portugal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .157

Romania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .163

Slovakia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .171

Slovenia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .177

Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .182

Sweden . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .190

United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .198

European Union Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .206

Appendix Country by Country Comparisons . . . . . . . . . . . . . . . . . . . . . . . . . . . . .210

Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .219

Employment and Benefits in the European Union

© Clifford Chance LLP, May 2007

Contents

Clifford ChanceClifford Chance is the first fully integrated global law firm, with 28 offices in 201 countries. The firm provides unified legal solutionsto the world’s leading financial institutions and multinational businesses. It has pan-European domestic capability, in-depth US lawresources and market-leading practices in Asia, Latin America and the Middle East. Clifford Chance provides legal advice oncomplex cross-border transactions, common and civil law. The firm gives practical tailored solutions to clients based on athorough understanding of their business needs.

For both local and cross-border issues our Employment Practice offers unrivalled expertise. Clients ranging from global businessesto small enterprises have come to trust and rely on the experience of our dedicated employment teams.

Day-to-day experience of dealing with a broad range of sectors, cases and employment issues puts us in a strong position toadvise on developments in employment law, their implications and the practical steps needed to address these. We also workclosely with our market-leading Employee Benefits and Pensions groups who advise on all areas of employee benefits, pensions,share schemes and related tax issues.

Informed, confidential advice is provided on the full range of employment and benefits law and best practice including:■ Tribunal litigation (such as unfair dismissal and discrimination claims)

■ High Court litigation (such as enforcement of restrictive covenants and dealing with claims for unpaid bonuses)

■ Alternative dispute resolution (mediation and arbitration)

■ Drafting and negotiating employment contracts, consultancy and secondment arrangements

■ Discrimination and equal opportunities issues

■ Appointment and termination of senior executives

■ Redundancies and collective dismissals

■ Employment aspects of mergers and acquisitions

■ Outsourcing of services, both domestically and internationally

■ European Works Councils, domestic works councils and workers consultation

■ Trade unions, collective disputes and industrial action

■ The application of TUPE and the Acquired Rights Directive

■ Protecting confidential information

■ Health and safety

■ Whistleblowing

■ European legislation and its implications for employers

■ Work permits and other immigration issues

■ Preparation and negotiation of social plans

The Brussels office has direct access to the Commission Directorate responsible and can enter into dialogue with the Commissionon behalf of clients.



2

1 Includes an associated office in Romania.

Employment and Benefits in the European UnionIntroduction

IntroductionThis guide is designed to provide anoverview of employment law in each ofthe 27 member states of the EuropeanUnion (“EU”). It has been limited to ageneral description of the areas ofemployment law in each Member Statewhich are of most interest:

■ how employees are engaged anddismissed;

■ the costs associated withemployment;

■ the rights of employees at the end ofthe period of employment.

Despite the complexity of modernemployment law, there are some generalprinciples common to Member Statesarising from the impact of EU Directiveson the domestic law of each of thecountries. A good illustration of this isthe Acquired Rights Directive, whichprotects employees in the event of the

acquisition of businesses and economicentities, and the legislation this has givenrise to in Member States. Harmonisationis increased by the fact that, in theinterpretation and application of lawbased on EU Directives, the decisions ofthe Court of Justice of the EuropeanUnion guide domestic Courts andTribunals in each state.

However, whilst common principles areevident, so too is a surprising degree ofdiversity. This is perhaps mostnoticeable in the cases of the UnitedKingdom and Ireland but is alsoapparent in the other EU MemberStates.

The pace of development both in termsof EU and domestic employment lawcontinues unabated. For these reasonsthis publication cannot serve as asubstitute for current and necessarilydetailed advice on particularemployment law problems which mayarise, but it is hoped that it will provide a

valuable and informative outline of therelevant law in the countries covered forour clients.

Unless the context otherwise requires,references in this publication to themasculine include the feminine, andreferences to “European Union” and“EU”, where the context requires,include references to “EuropeanCommunity” and “EC”. References tothe “European Economic Area” and the“EEA” are references to the EuropeanUnion and Iceland, Norway andLiechtenstein.

This publication is designed to provide ageneral summary of countriesapproaches to employment related lawas at 1 May 2007. It does not purport tobe comprehensive or to render legaladvice and consequently noresponsibility can be accepted for lossoccasioned to any person acting orrefraining from acting as a result of anystatement in this publication.

Clifford Chance Offices WorldwideAmsterdamTel: +31 20 7119 000Fax: +31 20 7119 999

BangkokTel: +66 2 263 2250Fax: +66 2 263 2240

BarcelonaTel: +34 93 344 2200Fax: +34 93 344 2222

BeijingTel: +86 10 6505 9018Fax: +86 10 6505 9028

BrusselsTel: +32 2 533 5911Fax: +32 2 533 5959

Bucharest (associated office)Tel: +40 21 211 4165Fax: +40 21 211 4168

BudapestTel: +36 1 4291 1300Fax: +36 1 4291 1390

DubaiTel: +971 4 362 0444Fax: +971 4 362 0445

DüsseldorfTel: +49 2 11 43 550Fax: +49 2 11 43 555 600

FrankfurtTel: +49 69 71 99 01Fax: +49 69 71 99 4000

Hong KongTel: +852 2825 8888Fax: +852 2825 8800

LondonTel: +44 (0)20 7600 1000Fax: +44 (0)20 7600 5555

LuxembourgTel: +352 48 50 501Fax: +352 48 13 85

MadridTel: +34 91 590 75 00Fax: +34 91 590 75 75

MilanTel: +39 02 806 341Fax: +39 02 806 34200

MoscowTel: +7 501 258 5050Fax: +7 501 258 5051

MunichTel: +49 892 16 32 0Fax: +49 892 16 32 8600

New YorkTel: +1 212 878 8000Fax: +1 212 878 8375

PragueTel: +420 2 22 555 222Fax: +420 2 22 555 000

PaduaTel: +39 04 980 42511Fax: +39 04 988 05900

ParisTel: +33 1 44 05 52 52Fax: +33 1 44 05 52 00

RomeTel: +39 06 422 911Fax: +39 06 422 912 00

São PauloTel: +55 11 3049 3188Fax: +55 11 3049 3198

ShanghaiTel: +86 21 6335 0086Fax: +86 21 6335 0337

Silicon ValleyTel: +1 650 566 4300Fax: +1 650 566 4399

SingaporeTel: +65 6416 8000Fax: +65 6535 6855

TokyoTel: +81 3 5561 6600Fax: +81 3 5561 6699

WarsawTel: +48 22 627 1177Fax: +48 22 627 1466

WashingtonTel: +1 202 912 5000Fax: +1 202 912 6000

Further details of our offices worldwide can befound at www.cliffordchance.com


3

Austria1. IntroductionWhilst there is no single statutegoverning all aspects of individual andcollective employment law, the mostimportant areas of Austrian labour laware codified in a wealth of detailedstatutes and regulations. Theseprovisions seek primarily to protect therights of employees. There are four mainsources of Austrian labour law:legislation, collective agreements, workagreements and individual employmentcontracts. Statutory provisions arenormally for the benefit of the employeeand therefore collective agreements,works agreements or individualemployment contracts must not containterms less advantageous to employees.However, the “favourableness principle”(Günstigkeitsprinzip) allows amendmentsto be made to agreements at a lowerlevel, provided that they are beneficial tothe employee. The primary piece oflegislation in this area is theArbeitsverfassungsgesetz 1974 (ArbVG)(Labour Constitution Act).

The low incidence of industrial disputesin Austria is the direct result ofharmonious relations betweenGovernment, employers and tradeunions, built on a social partnershipbetween employers’ and employees’representative organisations. Thefrequent use of collective bargaining asa method of resolving disputes hasplayed a fundamental role in ensuring ahistory of industrial peace. Strikes arerare even where a new agreement isbeing negotiated and are oftenconsidered to be illegal during theeffective period of an existingagreement.

Austria has two organisations thatrepresent employees’ interests at supra-enterprise national level; these are theTrade Unions Federation (ÖGB -Österreichischer Gewerkschaftsbund),based on voluntary association, and thestatutorily created Labour Chambers(Arbeiterkammern). The majority ofemployees in the private sector arecompulsory members of theArbeiterkammern. The statutoryorganisation for employers is the

Chamber of Commerce (ÖsterreichischeWirtschaftskammer), membership ofwhich is also compulsory.

There is a well-developed system of“co-determination” which ensuresemployee participation in the workplace,and Works Councils protect the interestsof employees on issues affecting workpractices.

Both collective and individual disputesare handled by special labour Courts.

2. Categories ofEmployees

2.1 GeneralAustrian employment legislation hastraditionally drawn a distinction betweenblue collar (Arbeiter) and white collar(Angestellte) workers. Legislation hastraditionally been used to regulateconditions affecting white collar workers,whilst most of the provisions for bluecollar workers have developed withincollective agreements. However,relatively recent changes in Austrianlabour law are aimed at treating bluecollar and white collar workers moreequally in the future.

2.2 DirectorsSenior executives and directors have aspecial position in labour law. Certainprotective laws (particularly the Hours ofWork Act (Arbeitszeitgesetz-AZG)) donot apply to managing directors(Vorstandsmitglied of anAktiengesellschaft and Geschäftsführerof a GmbH) and only partly to seniorexecutives. Senior executives are notrepresented by the Works Council.

The Employees’ Act(Angestelltengesetz-AngG) also appliesto the Geschäftsführer of a GmbH if heis not a controlling shareholder, butnever applies to Vorstandsmitglieder of astock corporation unless explicitlyagreed between the parties. TheVorstandsmitglieder only have a servicecontract (freier Dienstvertrag).

3. Hiring3.1 RecruitmentThere are no provisions regulatingemployee recruitment. However,according to the Labour ConstitutionAct (Arbeitsverfassungsgesetz)

employers must consult the WorksCouncil, if any, in connection withgeneral personnel planning. Theemployer must also inform the WorksCouncil whenever an employee isrecruited.

Employers with 25 or more employeesare obliged by law to employ onedisabled person for every 25 employeesor to pay a monthly compensation tax.

3.2 Work PermitsNon-EEA nationals need a work permitfor all types of employment, which canonly be applied for in Austria by theprospective employer. A residence permitis also required for non-EEA nationalsstaying for a period exceeding sixmonths. Once a work permit is granted,generally, an application for a residencepermit must be made from abroad to thelocal representative authority (Austrianembassy or consulate general).

EEA-nationals or Swiss nationals makinguse of their right of free movement andstaying longer than three months withinthe federal territory, have to apply for aconfirmation of registration(Anmeldebescheinigung). In general EEAnationals do not need any kind of workpermit, but there are various temporaryprovisions for the new EU-accessioncountries still limiting free access to theemployment market.

4. DiscriminationDiscrimination on the grounds of gender,ethnic affiliation, religion or philosophicalbelief, age or sexual orientation is expresslyforbidden by the Gleichbehandlungsgesetz2004 (Equal Treatment Act). This Actalso requires equal pay for equal work. Acommission and an attorneyship forequal treatment has been established toensure compliance with the principle ofequal treatment. Moreover, discriminationon the ground of a disability is prohibitedby the Disabled Persons EmploymentAct (Behinderteneinstellungsgesetz).

Protection also exists for those involvedin trade union activities. The ArbVGexpressly forbids discrimination againstpersonnel who exercise their statutoryworks representation powers. Specialprotection also exists againstunwarranted dismissal.

Employment and Benefits in the European UnionAustria


4


5. Contracts OfEmployment

5.1 Freedom of ContractEmployment relationships are regulatedthrough individual employmentcontracts, which are subject to commonlaw. However, the freedom to contractis, in practice, limited. The ArbVGspecifies that collective agreementsconcluded between statutory employerassociations and trade unions also applyto employees who do not belong to oneof the bodies concluding them. As aresult, Austrian collective agreementscover the majority of employees andemployers. Contracts of employmentbetween employers and white collarworkers are governed by theEmployees’ Act (AngG).

5.2 FormIn general, there is no special formrequired for an Austrian employmentcontract, which can be concluded orallyor in writing. In practice, legislation andcollective agreements cover the mostimportant conditions of employment.

Individual contracts are often used forthose employed at management level,specifying particular terms andconditions of employment.

As a result of Austria’s accession to theEU, the Act on the Adjustment ofEmployment Contracts (AVRAG –Arbeitsvertragsrechts-Anpassungsgesetz) has been enactedand provides that every employee isentitled to an employment document(Dienstzettel) which must contain theessentials of the terms of employment,such as name and address of employer,date of start of employment, noticeperiods, starting salary and holidays.

5.3 Trial PeriodsA probationary period must not exceedone month. During this period, eitherparty may terminate the employmentwith immediate effect without cause.

5.4 Confidentiality and Non-Competition

During employment, employees aresubject to a general duty of loyalty. Anemployee is therefore not allowed tocompete with the employer during theemployment or to disclose business

secrets. Post-termination restrictions oncompetitive activities must not exceedone year and may only limit activitiesrelating to the previous employer’sbusiness. The restrictions must notunreasonably restrict the employee.

5.5 Intellectual PropertyThe patent right to inventions made byemployees during the term of theiremployment will belong to the employee.Employers may enter into writtenagreements with employees conferring aright on the employers to futureinventions or a right of use of futureinventions. In such cases the employeemust receive adequate remuneration.

6. Pay And Benefits6.1 Basic PayWhilst there is no national statutoryminimum wage, minimum rates of payare fixed by collective agreementscovering virtually all employees. Throughthese legally binding agreements,employees are entitled to a 13th-month(holiday) bonus and a 14th-month(Christmas) bonus. In practice, the paygiven by many employers is higher thanthe agreed rates.

Works Councils and employers can onlydetermine incentive pay, whilst otherpayments can only be regulated by aworkers’ agreement to the extentallowed for by the collective agreementin force.

Regular benefits paid every year willbecome part of salary unless providedon a voluntary basis and stated to besubject to unilateral withdrawal.

6.2 Private PensionsThe majority of higher paid employeesare covered by company plans. Thepension target, inclusive of socialsecurity, is usually around 60 to 75 percent of final average earnings over a fullcareer. Other benefits normally providedare disability pensions and spouses’pensions with child supplements.Statutory vesting of accrued benefitsapplies after five years’ membership orten years’ service, if earlier.

Private pensions for employees aregoverned by the Company Pension Act(Betriebspensionsgesetz).

6.3 Incentive SchemesMost agreements with executivescontain provision for profit-relatedpayments.

6.4 Fringe BenefitsSenior executives are often entitled to acompany car and various insurances asfringe benefits.

6.5 DeductionsEmployers are under a statutoryobligation to deduct income tax andsocial security contributions from theearnings of their employees and toaccount to the tax authorities with thesedeductions.

7. Social Security7.1 CoverageThe state social security systemprovides benefits in the case ofretirement, disability, death, sickness,industrial injury and unemployment, aswell as covering health insurance andfamily allowances.

7.2 ContributionsBoth employees and employerscontribute to the financing of the socialsecurity system. Contributions arepayable up to a maximum assessmentbasis of EUR 3,840 per month. Thereare different rates of contributiondepending upon whether the employeeis a white or blue collar worker.

The rates for white collar workers andtheir employers as a percentage of payare as follows:

Insurance Employee Employer Total

Health 3.4 3.4 6.8

Accidents at work none 1.4 1.4

Pensions 10.25 12.55 22.8

Unemployment 3.0 3.0 6.0

The rates for blue collar workers andtheir employers as a percentage of payare as follows:

Insurance Employee Employer Total

Health 3.6 3.3 6.9

Accidents at work none 1.4 1.4

Pensions 10.25 12.55 22.8

Unemployment 3.0 3.0 6.0

In addition to his or her social securitycontributions, both white and blue collaremployees pay Chambers Labour fees


5

(Arbeiterkammerumlage) at a rate of 0.5per cent, and an employer has to bearan additional charge under theInsolvency Compensation Act(Insolvenz-Entgeltsicherungsgesetz-Zuschlag) at the rate of 0.7 per cent.There are other contributions forparticular categories of work.

8. Hours Of WorkThe number of working hours isregulated either by statute or bycollective agreement. Under theArbeitszeitgesetz 1969 (AZG) (WorkingHours Act) statutory working hours arelimited to eight per day and 40 perweek, although more may be possible incertain industries, (for example, wheredrivers or shift workers are employed),provided that the average weeklyworking hours over a specified perioddo not exceed 40 hours. Longerworking hours can be provided for bycollective agreements, to the extentpermitted by the AZG.

Under collective agreements the averageworking week is about 38.5 hours.Overtime is permissible, provided it isstructured so that no more than tenhours are worked on any one day andno more than ten hours overtime duringany week (subject to a maximum of60 hours annually).

The AZG also makes provision for workbreaks and rest periods. However, theAZG does not apply to senior executivesor Geschäftsführer of a GmbH, unlessotherwise provided in the collectiveagreement.

The working hours of young persons aregoverned by the Children and YoungPersons Work Act (Kinder-undJugendlichenbeschäftigungsgesetz).

Hours in excess of normal working timeconstitute overtime. An employeeworking overtime receives payment at ahigher rate than for normal working timeor time off. The AZG provides for a50 per cent increase in pay for normalovertime and collective agreementsfrequently provide for a 100 per centincrease for work on public holidays andSundays.

9. Holidays And Time Off9.1 HolidaysEmployees are entitled to paid absencefrom work on any public holiday, unlessthe public holiday falls on a Sunday inrespect of which the employer has noobligation to provide regular pay.All employees are statutorily entitledto a minimum of 30 working daysholiday a year (36 working days after25 years’ service). Saturdays arecounted as working days for thispurpose.

9.2 Family LeavePregnant women are entitled to takematernity leave starting eight weeksprior to confinement, and are entitled toa further period of eight weeks afterhaving given birth. Throughout thematernity leave period they receive fullpay. Either parent also has the right totake unpaid parental leave for a periodof up to two years.

There are various statutory provisionsregulating the type of work and length ofworking hours that can be undertakenby pregnant women.

9.3 IllnessEmployers are liable to pay full salary towhite collar workers as well as bluecollar workers for the first six weeks ofsickness, with a further period of fourweeks on half pay when the full payperiod ends. The period of full payincreases with the length of theemployment relationship up to twelveweeks’ pay.

10. Health And Safety10.1 AccidentsEmployers are responsible for equippingand running places of work so thatemployees are protected from avoidablework-associated accidents and illness.The Arbeitsinspektorat (Work InspectionOffice) has the authority to ensure thathealth and safety regulations arecomplied with.

10.2 Health and Safety ConsultationWorks Councils set up by statutoryauthority in all companies employing fiveor more permanent employees, have aright to co-determination on matters ofhealth and safety.

11. Industrial Relations11.1 Trade UnionsEmployees have a right of freedom ofassociation and the right to engage inunion activity. Since the establishment ofthe Austrian Trade Union Confederation(Österreichischer Gewerkschaftsbund –ÖGB) all political viewpoints and groupsof employees have been representedwithin it.

However, there is no direct trade unionrepresentation in the workplace. Instead,employees are represented by statutorilyelected Works Councils. The ArbVGrequires the creation of Works Councilsin all establishments employing at leastfive employees if employees or a tradeunion request the establishment of aWorks Council.

The number of members of the WorksCouncil depends on the number ofemployees it represents.

11.2 Collective AgreementsThe ArbVG gives legal authority for theconclusion of collective agreements.This authority is restricted to thestatutory representatives of employees(such as Chambers of Labour) andemployers (Economic Chambers).However, agreements concludedbetween voluntary organisations areeffective if they receive recognition fromthe Federal Conciliation Office(Bundeseinigungsamt), which oftenrequires proof that the organisation’sactivities extend over a significantgeographical and occupational area.

Single employer agreements areuncommon, as it is extremely rare forindividual employers to be given theauthority to conclude collectiveagreements.

Agreements must be registered with theMinistry for Economics and Labour andbe published in the official journal beforethey are valid. Their content is limited bythe ArbVG to covering issues essentialto pay and working conditions, rightsand obligations. The vast majority ofemployment relationships are regulatedby collective agreements.



6


Collective agreements are usually put inplace for particular industries orbranches of industries.

11.3 Trade DisputesThe negligible level of industrial conflictand the relative neutrality of the state inindustrial conflict have led to a notableabsence of specific statutory regulationof the conduct or resolution of industrialdisputes. The general law does notexplicitly recognise a right to strike,although Austria has ratified variousinternational conventions whichguarantee the right to strike. However,strikes aimed directly at the state areconsidered unlawful, and some publicsector workers are banned from striking.

The “social partnership” based on co-operation between Government,employers and unions, is the mainmethod by which strikes and industrialconflict are regulated.

11.4 Information, Consultation andParticipation

The concept of “co-determination”allows employees significant input in thedecision making process and shouldexist when staff have an equal status tomanagement in respect of establishmentissues. However, in reality co-determination is limited to what are seenas social issues, in particular dismissals,and does not exist in relation tocommercial or economic matters.

Employee rights are enhanced by WorksCouncils, which have rights of co-determination in respect of fundamentalorganisational changes and changes inworking practices. A Works Council hasthe right of access to informationregarding the financial position of thecompany, and is entitled to one-third ofthe seats on its company’s supervisoryboard. The Works Council can meetwith management at least four times ayear.

12. Acquisitions andmergers

12.1 GeneralThe employer must inform the workscouncil of any proposed changes to thebusiness. A merger with othercompanies will qualify as such a change.Although no strict time limit applies, the

employer must notify the works councilas soon as possible and sufficiently inadvance for the proposed change to bethoroughly discussed. The works councilmay request that a representative of thecompetent trade union joins theconsultations. The extent of theinformation to be given to the workscouncil is not governed by law, however,the information must be detailed enoughto allow for a thorough consultation withthe works council.

Notice of termination given by a sellingentity on account of a business transferis null and void, as is notice oftermination given by the purchasingentity after the transfer on account ofthe transfer. Transferring employees canbe dismissed if the dismissal is notmotivated by the business transfer (e.g.for misconduct). However, the employerhas to provide clear evidence that theonly reason for the dismissal was notthe transfer.

12.2 Information and ConsultationRequirements

During the consultation process, theworks council may propose measures tominimize any adverse consequences forthe employees arising from the changeto the business. If the business hasmore than 20 employees and thechange is detrimental for all or asubstantial number of them, theemployer and the works council mayagree on a social plan in order tominimize such detrimentalconsequences for the respectiveemployees. If the employer and theworks council cannot agree on a socialplan, the works council may address aspecial conciliation body(Schlichtungsstelle) at the competentlabour court. The Schlichtungsstelle isentitled to decide the terms of a socialplan after hearing the employer and theworks council on the matter.

If no works council exists, the employerhas to inform all transferring employeesin writing about the proposed transfer ofbusiness. There is no specific time limitfor such information. The informationhas to be given in writing and noconsultation is required.

12.3 Notification of AuthoritiesFrom an employment perspective thereis no need to notify the authorities of anacquisition or merger.

12.4 LiabilitiesA sale and purchase agreement can besigned before the information orconsultation is completed. Non-compliance with the information andconsultation obligation would not affectthe validity of a sale and purchaseagreement, thus, the works councilcannot delay or prevent a merger oracquisition. In the case of collectivedismissals which qualify as a change tothe business non compliance withinformation obligations may triggeradministrative penalty fees in theamount of EUR 2,180.

13. Termination13.1 Individual TerminationA white or blue collar employee whoseemployment is terminated by theemployer giving notice or by theemployee for good cause is entitled toseverance pay (Abfertigung), providedhe or she has completed three years’service.

The amount of the payment depends onthe length of service and ranges fromtwo to 12 months’ salary.

The Statutory Corporate EmployeeRetirement Schemes Act (BetrieblichesMitarbeitervorsorgegesetz – BMVG)imposes a new severance pay regime inrelation to all employees whoseemployment commences after31 December 2002. This replaces theold severance pay regime describedabove. In principle, the employer isobliged to make contributions of1.53 per cent of the monthlyremuneration (plus special payments)for each employee to a fund(Mitarbeitervorsorgekasse) and theemployees are entitled to receive thebalance of these contributions upontermination of their employmentcontracts, provided that certainconditions are satisfied.

For employment contracts entered intoon or before 31 December 2002, the oldseverance pay scheme will continue toapply unless employer and employee


7

agree that the new BMVG shall applyinstead. They may also agree to transferaccrued entitlements to severance payinto the new scheme.

13.2 Notice There are different notice periods forblue collar and white collar workers. Thenotice period in respect of blue collarworkers is generally 14 days. Collectiveagreements provide for different noticeperiods. In respect of white collarworkers, employers may terminate anemployment on six weeks’ notice,expiring at the end of a quarter.Depending on length of service, thisperiod increases to five months after 25years’ service. White collar employeesmay terminate their employment on onemonth’s notice expiring at the end of amonth. Employees’ notice obligations ofup to six months may be agreed subjectto the overall requirement that it cannotbe shorter than the notice required to begiven by the employer.

Notice of dismissal will only be effectiveif the relevant Works Council has beennotified in advance. The Works Councilhas five working days in which toconsult about the intended dismissaland comment on it. Thereafter theemployer can give notice to theemployee, although the Works Councilmust again be notified. Should theWorks Council agree, the notice is final,otherwise the notice can be appealedagainst by either the Works Council orthe employee concerned. Such anappeal will be heard by a Labour Court,but will only succeed if it can be shownthat the motives for dismissal aresocially unjustifiable.

An employment contract may beterminated without notice only for goodcause. A good cause justifying theimmediate dismissal of an employeeexists, for instance, if the employee hascaused serious harm to the employer’sinterests and it is, therefore,unreasonable for the employer toemploy the employee until the end ofthe applicable notice period.

13.3 Reasons for DismissalGenerally, both parties have the right toterminate an employment for anyreason. Restrictions on the employer

derive from public policy aimed at theprotection of employees fromunwarranted dismissal.

If an employer’s motives for dismissalare socially justifiable, then the dismissalis likely to be lawful. Dismissal will beunlawful, for instance, where thecontract is terminated because of theemployee’s involvement in a WorksCouncil, or involvement as an employeerepresentative for health and safety, ordue to an employee’s call-up for nationalservice.

As a matter of general principle, only theWorks Council is allowed to contestdismissals but, if there is no WorksCouncil or the Works Council does notreact, the employee may contest hisdismissal.

13.4 Special ProtectionIt is recognised that certain groups ofemployees are vulnerable tounwarranted notice of dismissal.Legislation therefore gives specialprotection to e.g., Works Councilmembers, pregnant employees,apprentices, disabled persons andemployees on military service.

13.5 Closures and Collective DismissalsSpecial rules apply to collectivedismissals, but the classification ofcollective dismissals depends on thenumber of employees in the companyand the number of employees to bedismissed. For example, the dismissal offive or more employees of a companywith more than 20 and less than 100employees will qualify as a collectivedismissal for the purposes ofemployment protection legislation.

An employer must give 30 days’ priornotice to the competent regional labouroffice if collective dismissals within aperiod of another 30 days are planned.At the same time, the employer has tosubmit evidence to the authorities thatconsultations have been held with theWorks Council in accordance with theLabour Constitution Act. Failure tocomply with these obligations mayrender the dismissals invalid.

A social plan may be required in respectof companies employing 20 or more

employees in order to avoid, remove oralleviate the consequences resultingfrom collective dismissals. The socialplan has to be negotiated with theWorks Council and put into effect as aworks, or shop, agreement.

14. Data Protection14.1 Employment RecordsThe collection, storage and use ofinformation held by employers abouttheir (prospective, current and past)employees and workers are governedby the Austrian Data Protection Act2000 (Datenschutzgesetz 2000 - DSG).Employee data may only be processedas far as the purpose and content of thedata is justified by the statutoryrequirements imposed on the employerand provided the employee’sconfidentiality is safeguarded.

Generally, the processing of employeedata is permissible to the extentnecessary to operate an ordinaryemployer-employee relationship.

14.2 Employee Access to DataEmployees, as data subjects, have theright to make a subject access requesteither in writing or, in agreement with theemployer, orally. This entitles them to beadvised of what data is held aboutthem, to whom it is disclosed to and tobe given a copy of their personal data.The employer may resist a subjectaccess request if justified interests of theemployer or a third person wouldotherwise be endangered. Requestsmust be answered within eight weeks.Generally, the employer has to complywith such a request without charging theemployee. Legally, a charge of c18,89may, however, be levied if a requestdoes not concern the current data of theemployee or the employee haspreviously requested access to dataduring the current year.

14.3 MonitoringThe monitoring of employee e-mail,internet and telephone use and ClosedCircuit TV monitoring is governed by theLabour Constitution Act(Arbeitsverfassungsgesetz) and theDSG. Monitoring is permissible unless itaffects a person’s dignity. Controlmeasures introduced to protect thedignity of data subjects require an



8


agreement between the Works Counciland the employing company before anymonitoring can take place. If no worksagreement can be concluded with theWorks Council, the employer must nottake the proposed measures.

14.4 Transmission of Data to ThirdParties

An employer who wishes to provideemployee data to third parties must doso in accordance with the DSGprinciples and processing conditions.Data may be transmitted only if theconfidentiality of the data subjectconcerned is safeguarded. If the datasubject concerned has consented to thetransmission of data, the confidentialityrequirement is deemed to be satisfied.Such consent may be revoked at anytime. Where the third party is basedwithin the European Union, a permissionto transfer data is not required ingeneral. The transmission of data tothird parties not based in the EuropeanUnion requires the permission of theData Protection Commission unlesscertain exceptions apply.


9

Belgium1. IntroductionThe legal relationship between employeesand employers is mainly governed by the1978 Law on Employment Contracts (Loidu 3 juillet 1978 relative aux contrats detravail - Wet van 3 juli 1978 betreffendede arbeidsovereenkomsten) and otherlegislation. Collective labour agreements,individual contracts of employment,working rules and normal practice areother important sources of employmentlaw are classified as such by a 1968Law.

Collective labour agreements areagreements negotiated betweenemployers’ and employeerepresentatives at national, industrialsector or individual undertaking level.They are automatically legally binding inrespect of all employers and theiremployees in, for example, a particularindustrial sector. Some of the terms ofthe collective labour agreement createindividual rights for the employees andform part of the individual contracts ofemployment.

The employer must have and provideeach employee with a copy of workingrules (arbeidsreglement - règlement detravail) which set out the basic commonterms and conditions of employment(such as hours of work, methods ofpayment and disciplinary procedures),independently from the employmentcontract.

Belgium is officially trilingual (Dutch,French and German). There are strictrules on the use of Dutch, French orGerman in employment documents andin connection with working relations.These vary according to thegeographical area where theemployment takes place; the languageis French in Wallonia, Dutch in Flandersand German in the relatively smallGerman speaking area. Brussels isofficially a bilingual city (Dutch andFrench) and the language to be used willnormally depend on the mother tongueof the individual employee.

Labour disputes are settled by locallabour Tribunals and by the labour

Courts, at appeal level. These Courtsare presided over by a professionaljudge and two lay members; onerepresenting employers, and the otheremployees.

There are a number of Governmentagencies that are responsible forenforcing the various health and safety,employment and social security laws.


2.1 GeneralBelgian employment law distinguishesbetween the blue-collar worker (carryingout principally manual work) and thewhite-collar worker (carrying outprincipally intellectual work). A number ofthe regulations applicable to blue-collaremployees differ substantially from thoserelating to white-collar employees.Management and senior supervisorypersonnel are distinguished from otherwhite-collar workers for the purpose ofcertain labour law provisions. The lawalso contains special provisions inrespect of other categories, for example,sales representatives, domesticservants, employees working from homeand students.

2.2 DirectorsDepending on the function they perform,directors of limited companies may betreated for employment law and socialsecurity purposes as both office holdersand employees. Normally separate rulesapply to each capacity. A director forinstance may be dismissed as a directorwith immediate effect and withoutcompensation; if the director is also anemployee, the stricter rules forterminating an employment contracthave to be complied with to terminatethe employment relationship.

Directors, who are remunerated throughdirectors’ fees, need to register and paysocial security contributions as self-employed persons. In addition, if theyare non-EU nationals, they need toobtain a “professional card” to dobusiness in Belgium as a self-employedperson, except in specificcircumstances.

Non-remunerated directors also have topay social security contributions but may

benefit from an exemption if they are EUnationals or nationals from anothercountry with which Belgium hasconcluded a social security treaty and ifthey already subscribe to another socialsecurity system.

Managing directors of small or medium-sized companies which do not form partof a larger group of companies will alsoneed to obtain and submit a certificatewhich proves that they have sufficientknowledge and/or professionalexperience to run the company(“bekwaamheidsattest - attestationconnaissances de gestion de base”).

2.3 OtherEmployers may employ temporary staffeither to replace an employee, or inorder to respond to an extraordinaryincrease of work, or to carry outexceptional work. Temporary employeesmust be paid a wage which pro rata isnot less than what they would beentitled to if they were a permanentemployee. Temporary (or interim) staffsupplied through an employmentagency may be employed in the samecircumstances; they are employed bythe agency but are entitled to the sameemployment rights as if they were anormal employee of the company.

A part-time employment contract mustbe made in writing before the employeestarts work. Part-time employees mustnormally work a minimum of one third ofthe usual full-time hours per week and aminimum of three hours each workingperiod. Part-time employees havepriority in applying for similar full-timepositions that become available and forwhich they have the requiredqualifications. Their salary must beproportionately equivalent to that paid tofull-time employees. This also applies toother employment rights.

Secondment in Belgium is only allowedin exceptional circumstances andprovided certain procedures have beenfollowed. For example, intragroupsecondments or secondment aimed at ashort-term execution of specialisedtasks which require specific professionalqualifications, are allowed providedadvance notification is given to theSocial Inspection. Other secondments

Employment and Benefits in the European UnionBelgium


10


require the prior consent of the SocialInspection. In both cases a prior writtenagreement between the employer, theseconded employee and the recipient ofthe employee’s services must set outthe terms of the secondment. Thesecondment rules do not apply howeverwhen an employer seconds one or moreemployees to another company toperform services contracted under acommercial services agreementprovided the employer’s authorityremains with the employer and thecompany benefiting from the servicesmay only give instructions in connectionwith the coordination andimplementation of the services, thehealth and safety rules applicable at theplace of work and the working hours.

Civil and criminal sanctions may beimposed in the event of unauthorisedsecondment. In the event that anemployee is seconded in breach of themandatory rules, the company whouses the service of the secondedemployee is considered to have anemployment contract of indefiniteduration with the seconded employeeand the employer and the user arejointly liable vis-à-vis the employee.

3. Hiring3.1 RecruitmentEmployers are free to select personnelas they wish (see however section 4“Discrimination”). Nevertheless, there aresome obligations imposed uponemployers when recruiting and selecting(such as paying the job candidate’sexpenses, giving proper information tothe candidate etc). Companies with atleast 50 employees must hire a certainpercentage of trainees and youngemployed persons (“Rosetta” jobs).There are also special rules concerningdisabled people.

3.2 Work PermitsWork permits are required for non-European Economic Area (EEA)nationals and should be applied for atthe Ministry of Employment before theemployee enters Belgium. They areusually only granted to persons inmiddle or senior management for aperiod of one year, but are renewable. Inaddition, residence permits are requiredboth for the employee and his or her

family and should be applied for as soonas the work permit has been granted.

4. DiscriminationDiscrimination on 15 listed grounds (i.e.sex, race, colour, ancestry, nationality,ethnic origin, age, sexual orientation,religion, handicap, civil status, birth,wealth, health and physicalcharacteristics) is expressly prohibitedby the law of 25 February 2003. Itshould be noted that the BelgianConstitutional Court (Cour d’arbitrage -Arbitragehof) has in the meantime ruledthat any discrimination on grounds otherthan those expressly set out in the lawof 25 February 2003, should also beconsidered a violation of this law.

If an employee can provide evidencefrom which an inference can be drawnthat the employer acted in adiscriminatory manner, it will be up tothe employer to prove that he hadobjective and justifiable reasons for nottreating the employee in the same wayas other employees. If the employer failsto demonstrate this, he could be forcedto pay an additional indemnity of sixmonths’ remuneration, or more if theemployee can show that he has beenput at a substantial disadvantage.

The scope of this law is extremelybroad: it applies to all aspects of theemployment relationship, includinghiring, payment of remuneration,promotion and dismissal. In addition, in2002 a law on sexual and moralharassment was passed requiringemployers to take all the necessarymeasures to avoid sexual and moralharassment in the work place and todesignate persons responsible for givingassistance to victim. This law providesthat an employer may not dismiss thevictims of and/or the witnesses to asexual or moral harassment for reasonsdirectly or indirectly related to theharassment. Dismissal in breach of thisprohibition can result in an additionalindemnity of six months’ remuneration,or more if the employee can show thathe has been put at a substantialdisadvantage.

5. Contracts ofEmployment

5.1 Freedom of ContractThere are certain restrictions on freedomof contract. No contractual term may beless favourable to the employee thanany mandatory legislative provision orany applicable collective agreement.Indeed most of the provisions protectingemployees are deemed to be mandatory(“imperative”- “dwingerd”). Additionally,provisions in the individual contract thatallow the employer to unilaterally varythe contract, or to automaticallyterminate the contract (for instance, inthe case of an employee reaching thestandard retirement age) are void.

5.2 FormA contract for an indefinite term neednot be in writing. However, a provisionpurporting to contract out of a legislativeprovision or a collective labouragreement (where this is allowed) mustbe in writing, as must certain specificclauses such as a non-competitionprovision, a clause providing for a trialperiod or a clause capping thetermination entitlement of a higher-paidemployee. Some of these provisionsmust be agreed in writing prior to thecommencement of employment.

Several types of contracts such as fixed-term contracts or contracts for a specificassignment must be in writing.Such contracts may be renewed but notfor several successive periods, except injustified circumstances. They are closelyregulated to ensure that they are notused to evade the application of legalrules on indefinite contracts, forexample, those on termination ofemployment.

However, a certain degree of flexibilityexists to conclude successive fixed-termcontracts. The parties may agree toconclude a sequence of a maximum offour fixed-term contracts, each contracthaving a minimum term of three months(not exceeding in aggregate a period oftwo years; in some circumstances andprovided consent is obtained from theSocial Inspection, a period of threeyears is permitted provided eachcontract has a minimum term of sixmonths).


11

5.3 Trial PeriodsThe parties can agree (before thecommencement of employment and inwriting only) to a trial period. The lawprovides trial periods which are differentfor blue-collar workers (seven to14 days), white-collar workers (one tosix months) and employees earningabove a pay threshold (one to12 months). During the trial period,the contract can be terminated on shortnotice which varies according to thecategory of employee.

Special rules apply when the contract issuspended (due to sickness, forinstance) and different periods apply forstudents and servants.


The law provides that an employee hasa duty to refrain from disclosingbusiness secrets and any other secretsof a confidential nature during thecontract or after its expiry; nor may anemployee engage in unfair competition.The terms of an employment contractcan reaffirm these employee obligationsbut may not contain more restrictiveobligations than those imposed by law.

Restrictions on competition applicableafter the employment has ended areonly valid if certain conditions are met(for example, a maximum duration ofone year) and if these conditions havebeen expressly set out in the non-competition provision. The provision willnot be effective if the employerdismisses other than in circumstancesinvolving serious fault on the part of theemployee. A non-competition provisionis not valid in the case of a lower-paidemployee. Where a non-competitionprovision is enforced the employer mustmake a payment to the employee equalto at least half the remuneration whichwould have been earned during thenon-competition period had theemployment continued. Internationalcompanies and companies with aresearch and development unit benefitfrom more flexibility as regards theconditions of application of non-compete clauses and may also increasethe time and geographical limitationsapplicable to such clauses.

5.5 Intellectual PropertyIn general, the employee is owner of hisinventions. It is however possible tocontractually provide otherwise inrespect of inventions made by anemployee during his/her working hours,in the course of his/her work and withmaterials provided by the employer.Other than in these circumstances, thereis some legal debate as to whether anemployer can contractually provide thatpatents will belong to it instead of to theemployee.

Works protected by copyright alsobelong to the employee and may onlybe transferred to the employer byexpress agreement. In contrast, thepatrimonial rights to softwareprogrammes and databases protectedby copyright developed by employeesautomatically belong to the employer.

6. Pay and Benefits6.1 Basic PayThe National Labour Council negotiatesannually a national collective labouragreement on minimum wages which isbinding on all employers. As at October2006, the standard minimum monthlygross wage amounts to c1,258.91. Forfull-time employees of 211/2 years of agewith more than six months’ service thisminimum wage amounts to c1,293.61.For employees of 22 or over with morethan twelve months’ service thisminimum wage amounts to c1,309.03.In some sectors the collective labouragreements provide for remunerationscales.

Pay, including that of managers andexecutives, is usually index-linked as aresult of compulsory collective labouragreements. The system is not uniformand different rules for the index-linking ofsalaries apply depending on the relevantcollective agreement.

“Wage moderation” measures havebeen introduced, reducing substantiallyan employer’s flexibility to determinesalaries. For the period 2007-2008, thetotal salary cost of employers cannotincrease by more than five per cent. Thefour and a half per cent margin includesincreases resulting from the automaticindexation of salaries and scaleincreases set by collective labour

agreements. In certain sectors ofindustry, the threshold may be reducedby decision of the union and employerrepresentatives on a national level.For the period 2005-2006, the marginwas four and a half per cent.

6.2 Private PensionsThere is no obligation on employersgenerally to provide private pensionarrangements. However, legislationintroduced in March 2003, was intendedto facilitate a larger number ofemployees accessing private pensionsby encouraging the establishment ofindustry sector level pension regimes.It considerably restricts the ability of anemployer to make individual pensionarrangements.

Typically, a company plan will aim toprovide 1.25 per cent - two per cent offinal earning for each year of service,less the state pensions earned duringthose years.

6.3 Incentive SchemesA Law of 26 March 1999 introduced afavourable tax regime for stock optionsgenerally applicable to Belgian residentindividuals. This law provides that thegrant of stock options constitutes ataxable benefit, calculated on the basisof a percentage of the value of theunderlying shares. The grant of stockoptions will be deemed to have beenrefused on the sixtieth day following thedate of the offer of such stock options, inthe absence of an express acceptanceof the offer by the employee. For listedoptions, the taxable benefit is determinedon the basis of the stock market pricepreceding the grant. For non-listedoptions, the taxable benefit is equal to15 per cent of the value of the underlyingshares, such percentage being increasedby one per cent per year or fraction of ayear for the duration of the life of theoption exceeding five years from thedate of the offer. If certain conditions aremet, the taxable benefit can be reducedto half. Any positive difference betweenthe value of the underlying shares andthe exercise price is also subject to tax.

The benefit derived from the grant of thestock options is not subject to socialsecurity taxes except in specialcircumstances.



12


6.4 Fringe BenefitsThere is a comprehensive state healthsystem, but private medical plans thatprovide insurance for medical expensesnot covered by the social securityprogramme are not uncommon forsalaried employees.

Other fringe benefits such as cars, mealvouchers and life insurance cover arecommon and once granted cannot bewithdrawn. The procedure for agreeingthem can sometimes be cumbersomeand require a number of formalities to becomplied with.

6.5 DeductionsTax on employees’ earnings is deductedby employers at source. The tax year isfrom 1 January to 31 December.Employees’ social security contributionsmust also be deducted at source. Thereare concessions and deductions allowedfor non-resident executives.

6.6 MiscellaneousCollective labour agreements in manyindustry sectors require that on top ofthe monthly basic salary, employers payan additional year-end bonus in the formof a thirteenth month, or in some rareinstances, even a fourteenth monthsalary. During his/her holiday, a white-collar employee is entitled to his/hernormal remuneration (simple holidaypay) and an additional 92 per cent ofhis/her monthly gross salary (doubleholiday pay). A white-collar employee’sholiday entitlement and holiday pay iscalculated by reference to the workcarried out the previous year. Upontermination of a white-collar employee’semployment contract, the employer islegally compelled to pay to theemployee an end of service holidaypayment for (i) accrued but untakenholiday in the year of termination (i.e.15.34 per cent of the grossremuneration earned by the employeeduring the year preceding thetermination) and (ii) the holidays to whichhe/she is entitled in the year followingthe year of termination, based on his/heremployment with the employer in theyear of termination (i.e. 15.34 per centof the gross remuneration earned by theemployee during the year oftermination).

Blue-collar employees are entitled to aholiday allowance paid by the NationalOffice of Annual Holiday (“office Nationaldes Vacances Annuelles” “Rijksdienstvoor Jaarlijkse Vakantie”). In order tofinance this, the employer must pay amonthly contribution broadly equal to sixper cent of the salaries paid during theprevious year and, must pay, an annualcontribution equal to 10.27 per cent ofthe salaries paid during the sameperiod.

7. Social Security7.1 CoverageThe Belgian social security systemprovides for retirement, disability andsurvivors’ pensions, sickness andmaternity pay, occupational diseasesand unemployment benefits, and familyallowances.

7.2 ContributionsEvery employer should be registeredwith the Office National de SécuritéSociale and is liable to pay socialsecurity contributions. The scheme isfunded by employers deducting socialsecurity contributions from employees’pay at source and by employers’ owncontributions. Both employees’ andemployers’ contributions are based on apercentage of total earnings.Contributions are due in respect of allpersons employed in Belgium.Exceptions may apply to EuropeanUnion nationals who are working onlytemporarily in Belgium and arecontinuing to contribute to their homecountry scheme, or to nationals fromcountries that have reciprocalagreements with Belgium that providefor such exemptions.

Employee social security contributionsamount to 13.07 per cent of salary.Employer contributions vary dependingon whether they are for blue-collar(approximately 50 per cent) or white-collar employees (approximately 35 percent). However, in certain sectors, thesepercentages can be much higher. Thisdifference is mainly due to the fact thatfor blue-collar employees holiday pay ispaid by the employer indirectly throughsocial security contributions but forwhite-collar employees holiday pay ispaid directly by the employer to theemployee.

8. Hours of WorkSubject to exceptions, the maximumpermissible hours of work are eighthours per day or 38 hours per week.Collective agreements usually provide forless than the maximum. Overtime isallowed in certain circumstances withinspecific limits. In addition tocompensatory rest periods, overtime willin certain circumstances be paid at apremium of 50 per cent of hourly pay,increased to 100 per cent for Sundaysand public holidays.

In principle, work at night (i.e. between8pm and 6am) is prohibited. Undercertain circumstances, however, and incertain professions work at night may beallowed.

9. Holidays and Time Off9.1 HolidaysEmployees are entitled to a minimum of20 days per year, although collectivelabour agreements often increase suchholiday entitlement. A holiday allowanceis paid annually to blue-collar workers bya special fund. Employers pay a holidaybonus to white-collar employees inaddition to the normal remunerationduring the period of absence; the bonusamounts to 92 per cent of monthlygross salary.

There are ten public holidays in respectof which an employee is entitled to paybut cannot be obliged to work.

There is a system of paid educationalleave that allows employees to attendrecognised courses and take a specifiednumber of hours off work for thispurpose while maintaining their salary.During the educational leave theemployee is entitled to his/her regularwages, subject to a maximum ceilingprovided by law. The employer receivesa limited reimbursement from the state.

9.2 Family LeaveWomen are entitled to 15 weeks’maternity leave. Maternity pay isprovided by the social security fund; itamounts to 82 per cent of the dailygross salary (uncapped) for the first 30days and 75 per cent of the daily grosssalary (up to c82.17) for the remainingperiod. The father is also entitled to tendays’ paid paternity leave after the birth.


13

The first three days of paternity leave arepaid by the employer. The sevenremaining days are paid by the medicalcost insurance to which the employer isaffiliated. Paternity pay for this periodamounts to 82 per cent of the dailygross salary (up to c89.84).

Women are also entitled during theirworking hours to take one or twobreast-feeding breaks of 30 minutesduring a seven-month period after thebirth. Both the mother and the father areentitled to parental leave up to a child’ssixth birthday. The parents have anumber of options: (i) they can chooseto entirely suspend their employment fora maximum period of three months.This period may be split up into threeseparate monthly periods; (ii) the parentsmay prefer to work part-time during anuninterrupted period of six months;(iii) the parents may opt to reduce theirworking time from 100 per cent to80 per cent during a period of15 months. This period may be split upinto periods of a minimum five months.Each parent is entitled to parental leaveregardless of which parental leaveoption (if any) the other parent chooses.

If the employer terminates theemployment contract for a reasonrelated to parental leave, it will becompelled to pay an indemnity of sixmonths’ remuneration in addition to theordinary termination package.

9.3 IllnessEmployees are entitled to guaranteedwages in the event of sickness.The arrangement depends on theclassification of the employee (white-collar workers or blue-collar workers),seniority and on whether the employeeis in his trial period or not. White-collarworkers engaged under an indefinitecontract who are sick after the end oftheir trial period are entitled toguaranteed wages during the first30 days of their absence. After theperiod covered by the guaranteedwages, the employee is entitled tobenefits from the social security fund.

10. Health and Safety10.1 AccidentsEmployers are liable for their employees’work related accidents including those

occurring on the way to or from work orduring and as a result of theemployment. Insurance covering suchliability is compulsory. Also, everyemployer must organise or subscribe toa company medical service responsiblefor the health and safety of workers.

10.2 Health and Safety ConsultationAny undertaking with 50 or moreemployees must establish a Health andSafety Committee (Comité pour laPrévention et Protection au Travail) withemployer and employee representatives.The committee is entitled to receive amonthly report on health and safetyconditions, information on potential risksand reports on the activities of the safetyofficer and medical service from theemployer. It must be consulted on healthand safety policy, the purchase ofprotective equipment and changes inthe working environment. It does nothave power to stop the work of theundertaking on health and safetygrounds.

All companies - irrespective of the sizeof workforce must create an internal orexternal safety and security service inthe work place, which must collaboratewith the Health and Safety Committee,if any.

11. Industrial Relations11.1 Trade UnionsThere is a legally guaranteed right toform, belong to or not to belong to atrade union. About 80 per cent of thenational workforce is represented bytrade unions. Unions are notincorporated, have no liability at law andcannot be sued. However, a unionrecognised by the Ministry of Labourhas locus stand in the labour Court tosue for enforcement of legal rightsgranted to its members. The three majorunion confederations, which are closelylinked with the three major politicalparties, are as follows:

■ ACV-CSC (Confederation ofChristian Trade Union) - linked to theChristian Democrats;

■ ABVV-FGTB (Belgian GeneralFederation of Labour) - linked to theSocialists; and

■ ACLVB-CGSLB (Federation ofLiberal Unions of Belgium) - linked tothe Belgian Liberal Party.

Unions tend to be industry based.They usually have separate sections forwhite and blue-collar workers and forFrench and Dutch speakers.Local groups are co-ordinated atnational level where the most importantnegotiation and decision-making occur,although there has been a trend to morecompany-based agreements tosupplement national agreements,particularly in more prosperous,strongly unionised undertakings.

11.2 Collective AgreementsCollective agreements are concluded;

■ at national level by the NationalLabour Council which has a generaljurisdiction in matters such asminimum wages, recruitment, hoursof work, etc;

■ at industry sector level in JointCommittees with representatives ofboth employers and employees indifferent types of trades andindustries and cover matters such asminimum wages, index linking ofremuneration, hours of work, annualholidays, restriction on theemployers’ rights of dismissal,annual bonus etc; and

■ at the individual undertaking level byagreement between the employerand the relevant unions.

11.3 Trade DisputesBelgium has no comprehensive strikelaw, but, in the case of “official” strikeaction, participation is neither a crimenor a breach of contract. The contractsof the employees who are striking and ofthose who are prevented from workingare suspended for the duration of thestrike; the employees are not entitled totheir wages. Employees who participatein the strike will normally receive a dailypayment from their respective unionorganisations. Employees who do notparticipate in the strike but cannot workas a result of the strike are entitled tosalary from the employer or tounemployment benefits subject to theapproval of the unemployment



14


authorities. Lock-outs, althoughpossible, are virtually never initiated byemployers in Belgium.


Trade unions, via their representatives inthe National Labour Council, have theright to be consulted by the Governmenton proposed regulations in certain fieldsof labour law. Also, unions participate inthe management of, for example, theNational Social Security Office, theNational Employment Office and theWork Accident Fund.

At plant or undertaking level, informationis provided to and consultation/negotiation can be conducted with orthrough:

■ Labour Union Delegations - theserepresent union members and dealwith plant or undertaking levelnegotiations and disputes; collectivelabour agreements in each sector ofindustry determine the terms uponwhich a union delegation may beestablished in an undertaking;

■ Works Councils - undertakings withat least 100 employees mustestablish a Works Council. TheCouncil is made up of employee andemployer representatives and has aright to certain information about thebusiness and a right to be consultedbefore certain managementdecisions are taken - there is alimited right of co-decision making(principally on “social matters” likeannual holiday dates). Consultation isrequired in respect of collectiveredundancies and take-overs. TheWorks Council must meet at leastonce a month and upon the requestof at least half the employees. Timespent on Council activities is treatedas normal working time; and

■ Health and Safety Committees -undertakings with 50 or moreemployees must have such acommittee.

12. Acquisition andMergers

12.1 GeneralThe Acquired Rights Directive has been

implemented in Belgium under CollectiveLabour Agreement Nr. 32 bis. Accordingto this Collective Labour Agreement, inthe event of a take-over or acquisition ofa business, the transferee takes over allrights and obligations with regard to theemployees. In principle the sale ortransfer of the business cannot be usedas a reason for dismissal. Likewise,unless there has been a change in theterms and conditions of employment, anemployee cannot treat the sale asbreach of contract.

Special rules apply when theundertaking transferred is that of aninsolvent company.

12.2 Information and consultationrequirements

With the exception of article 15 bis, theCollective Labour Agreement Nr. 32 bisdoes not contain any provisionsimposing special information and/orconsultation requirements in the event ofa transfer of an undertaking or a part ofan undertaking. Therefore, the generalrules on information and consultation setout in the collective labour agreement n°9 of 9 March 1972 apply. This providesthat in the case of a merger oracquisition, closure or other significantstructural changes in respect of whichthe undertaking is conductingnegotiations, the work’s council needsto be informed at an appropriate timeand before any announcement is made.It must be consulted in advance on theimpact of the transaction on theemployment prospects, the organisationof the work and the employment policyin general.

If the company does not have a works’council, the information and consultationmust take place with the unionrepresentatives. In the absence of aworks’ council or trade union thecompany must inform its employeesdirectly.

The employer must inform theemployees’ representatives of theeconomic, financial or technical reasonsfor the contemplated transaction as wellas of the possible economic, financialand social consequences of thetransaction. In addition, the employees’representatives must also be effectively

consulted on such measures, inparticular on employment forecasts, onwork organisation and on the company’semployment policy.

It should be noted that Collective labourAgreement Nr. 9 does not set out howthe procedure of information andconsultation should be conducted. Onemeeting should be sufficient for theinformation procedure; although theinformation could be provided verbally,it is however advisable to have writtenproof (e.g. a statement in the minutes ofthe council’s or union’s meeting). Theconsultation, on the other hand, shouldbe interactive: the employer will have togive its employees’ representatives theopportunity to ask questions in relationto the contemplated transaction, toformulate arguments and make counterpropositions, and, will have to examineand answer the questions, argumentsand counter propositions. Severalmeetings will therefore need to be held.It is important to note that, althoughthere is a duty to effectively consult(i.e. to try to reach a consensus), theemployer will not need to obtain anactual agreement with its employees’representatives; they have no power ofveto. Accordingly, the employees’representatives will not have the abilityto delay or to prevent the contemplatedtransaction.

Article 11 of the CLA n° 9, provides thatthe information must take place “in duecourse and before any announcement ismade”, and consultation must“effectively” take place “in advance”.Article 3 of the CLA n° 9, provides thatthe information and consultation musttake place “prior to the decision beingtaken. (…) This must enable the workscouncil to expertly conduct discussionsduring which the members will be ableto advise, make suggestions orobjections.”

Accordingly, the information andconsultation process must thus takeplace prior to the decision on theplanned change in structure.The employees’ representatives cannotbe presented with a “fait accompli”and the employer may not reduce theinformation and consultation to a mereformality. In addition, the works council


15

must be informed before any publicstatement is made.

Even if a company does not have toinform and consult with the employees’representatives according to article 11 ofCLA n° 9, it may nevertheless have anobligation to inform on the basis ofarticle 25 of the Royal Decree of27 November 1973, when (i) it has aworks council, (ii) the contemplatedtransaction is known to it and (iii) thecontemplated transaction could have asignificant impact on the social, financialand economic situation of the company,irrespective of whether the company isconducting negotiations.

Unlike article 11 of CLA n° 9, theemployees’ representatives need only beinformed of the consequences of theevents or the decisions for thedevelopment of the company’s activitiesand for the employees’ situation. TheRoyal Decree does not requireconsultation as such. The informationmust be provided “if possible, before thedecision is implemented”. Theinformation may therefore be given aftersigning but before closing. The words“if possible” mean that these decisionshave to be communicated before theyare implemented, unless it is practicallyimpossible for the employer to convenethe work’s council, or the employer hasan obligation of confidentiality based onother regulations.

Finally, if redundancies arecontemplated, the employer will beobliged to follow an additionalinformation and consultation procedureif he is facing a collective dismissal.However, the rules that must be appliedin such situation are different (andstricter) than those described above.

12.3 Notification of AuthoritiesThe Federal Ministers of Finance and ofEconomic Affairs and the regionalMinister of Economic Affairs must benotified in advance of a transfer of one-third or more of the equity of a companyconducting its business in Belgium ifthat company’s net assets arec2,500,000 or more, but no governmentconsent or response is required and thelaw does not provide for any penalty incase of a failure to notify. This

notification obligation does not apply inrelation to the Walloon region.

12.4 LiabilitiesFailure to comply with the informationand consultation obligations of CLA n° 9does not affect the validity of atransaction. However, it can result incriminal sanctions, if the works’ councilor union delegation had to be informedand consulted, subject to a maximum ofEUR 550,000. If the employer is notsubject to criminal sanctions, it may stillbe subject to administrative fines of EUR50 to EUR 1,250 per employee subjectto a maximum of EUR 20,000. Inaddition, employees could also claimdamages for non-compliance withCollective Labour Agreement No. 9 bythe company.

Failure to comply with the informationobligations of the Royal Decree can alsoresult in criminal sanctions.

In the event of a collective dismissal,failure to comply with the informationand consultation obligations may giverise to criminal sanctions, including finesand imprisonment against theundertaking itself as well as against themanagers. In addition, the employeesmay challenge the validity of theinformation procedure. If the challenge isfound to be justified, the employees canask to be reinstated, and failure toreinstate them will result in an additionalindemnity.

An undertaking that takes over anothermust respect the terms of any previouslyagreed collective labour agreement untilthe expiry of that agreement. In addition,the terms of such collective labouragreement which are deemed to formpart of the individual employmentcontracts, cannot be withdrawn ormodified unilaterally by the employer.

13. Termination13.1 Individual TerminationAn employment contract entered into fora fixed-term or for a specific assignmentexpires automatically when the agreedperiod has elapsed or when the agreedassignment is completed.

An employment contract entered into foran indefinite period of time can be

terminated by giving notice or by payingcompensation in lieu of notice.

13.2 NoticeA contract concluded for an indefiniteperiod of time may be terminated by theemployer or the employee by givingnotice. Notification of the start date andthe duration of the notice period mustbe in writing (if by the employer, in themother tongue of the employee) andsent by registered mail to the otherparty. The notice is deemed to havebeen received three working days afterthe date of the dispatch of the noticeand takes effect on the first day of thefollowing week in the case of blue-collaremployees, and on the first day of thefollowing month in the case of white-collar employees. In urgent cases, thisprocess can be speeded up, using abailiff notification. Notice periods are:

Notice by Notice byEmployer Employee

Blue-collar

- between 6 months’ and 35 days 14 days5 years’ service

- between 5 years’ and 42 days 14 days10 years’ service



- 20 years’ service or more 112 days 28 days

White-collar earning e28,093per annum or less

- up to 5 years’ service not less 11/2 monththan3 months

- for every further 5 years’ a further maxservice 3 months 3 months

Highly paid white-collar “reasonable max notice” 6 months

For blue-collar employees, collectiveagreements regularly provide for longernotice periods and for white-collaremployees, collective labour agreementscan provide for certain specialprocedures or can impose restrictionson dismissals which may entitle thedismissed employees to additionalindemnities.

Highly paid white-collar employees aredefined as those earning above a paythreshold which is adjusted annually(c28,093 per annum for the year 2007).The notice period for these employeeshas to be agreed at the time of thedismissal failing which it has to be fixed



16


by the labour Court. In fixing areasonable period of notice, the Courtwill take into account factors such asthe age of the employee, his or herperiod of service with the employer, theposition held and the remuneration.Several formulae based on statisticalanalysis of relevant cases are used forcalculating notice periods, but Courtsare not bound by any of them.

A period of notice fixed in advance willnot bind the parties, except in the caseof higher paid employees (i) earningsalaries above a threshold level (in 2007,c56,187 per annum), (ii) employed after1 April 1994 and (iii) with whom a noticeperiod was agreed before thecommencement of the employment.Such previously agreed notice periodsmay not be less than three months foreach period of five years’ servicecommenced.

The employer can also terminate thecontract by paying compensation in lieuof notice. In this case, there are noparticular formalities and the terminationcan take effect immediately. Thecompensation is equal to theremuneration that would have beenearned during the notice period.

13.3 Reasons for DismissalThere is, in principle, no obligation tojustify a decision to give notice but theright to give notice must not beexercised “abusively”, otherwise theother party may be entitled to claimcompensation. However, according tothe law of 25 February 2003 againstdiscrimination, it is unlawful to selectemployees for redundancy ondiscriminatory grounds. Breach of thislegislation entitles an employee to anindemnity of a minimum of six months’remuneration. With regard to blue-collaremployees, the law considers atermination to be “abusive” if theemployee can show that he or she wasnot dismissed for reasons connectedwith his or her conduct or competenceor some bona fide economic reasonconnected with the running of thebusiness.

The employer can terminate the contractimmediately for gross misconduct (motifgrave - dringende reden), i.e. any

culpable act or omission immediatelyrendering the continued workingrelationship impossible. The terminationmust be notified in writing but isoperative instantly. If the employer doesnot act within three working days ofdiscovering an employee’s grossmisconduct, it cannot be used to justifyinstant dismissal without notice orpayment in lieu of notice.

Until 30 June 1997, the normalretirement age was 60 years for womenand 65 years for men. As of that date,however, the retirement age for womenis progressively being increased so thatby the year 2009, the normal retirementage will be 65 years both for men andwomen. With effect from 1 January2006, the retirement age for women is64 years.

Termination is not automatic and noticehas to be given by the employer butreduced notice periods apply from age60 (in the event of a resignation by theemployee) and from the age of 65 (in theevent of dismissal by the employer).

Pre-pension arrangements are availablein certain circumstances. Theseschemes are normally available topersons over 60 years of age with atleast 20 years’ service unless a lowerage threshold is agreed by collectivelabour agreement at the level of therelevant joint committee or at the level ofthe undertaking. If an employee underan early retirement scheme is dismissed,then the employer may be liable to payhalf the difference between the netsalary (calculated by reference to themonthly gross salary up to a ceiling) andunemployment benefits during suchperiod that the employee is unemployedand receives unemployment benefits.This pre-pension payment is in additionto notice (or the payment ofcompensation in lieu of notice) but isonly due after the expiry of the noticeperiod (or the period covered by thecompensation in lieu of notice). Where apre-pension agreement is agreedbetween the employer and theemployee, it is relatively common toreduce by mutual agreement the notice(or compensation in lieu of notice) to theminimum legal entitlement.

13.4 Special ProtectionThe law provides special protection forseveral categories of employees who areconsidered particularly vulnerable suchas pregnant women, candidates anddelegates to Works Councils and Healthand Safety Committees, safety advisers,employees holding political office andthose called up for service with thearmed forces, etc.

Such protection generally includes aprohibition against dismissal and anobligation to pay a variable sum by wayof compensation if the prohibition isinfringed. For instance, a delegate to theWorks Council at the beginning of his orher mandate and with more than 20years’ service could claim a specialpayment of up to eight years’ salary.

13.5 Closures and Collective DismissalsSpecial rules apply to undertakingswhich have more than 20 employees.

In the event of the closure of anundertaking with an average of at least20 employees in the previous calendaryear, or in the event of a large reductionin its workforce (i.e. to below onequarter of the average number ofpersons employed in the precedingyear), an additional redundancy paymentmust be paid to employees with morethan one year’s service whoseemployment has been terminated duringa stipulated period before or after theclosure of the undertaking or reductionin its workforce.

There are other procedures andpayments in the event of collectivedismissals by an undertaking which hadan average of at least 20 employees inthe previous calendar year. How therules on collective dismissals will applydepend upon the size of the undertakingand the number of dismissedemployees. In addition to the notice orpayment in lieu of notice, a paymentmust be made to employees who,following their redundancy, are eitherunemployed or have found newemployment but at lower pay. Anemployee is not entitled to receive bothcollective dismissal and closurepayments.


17

In the event of either closure orcollective dismissals, there is anobligation to inform and consult withemployees. The employer must informthe Works Council or, if there is noCouncil, the union delegation (or theemployees directly if none of thesebodies exist) of the proposedredundancies or closure. In addition,various Governmental agents must beinformed such as the Ministry of Labourand the Regional Office of Employment.Specific procedures, formalities andwaiting periods apply in bothcircumstances. Failure to comply withthe information and consultationprocedure may give rise to civil andcriminal and/or administrative sanctions.

14. Data Protection14.1 Employment RecordsThe collection, storage and use ofinformation held by employers abouttheir employees and workers(prospective, current and past) areregulated by the law of 8 December1992 on the protection of privacy inrelation to the processing of personaldata (the “Privacy Law”). The PrivacyLaw was amended with effect from1 September 2001 by the law of11 December 1998 implementing theEU Data Protection Directive.Infringement of the Privacy Law can leadto fines, compensation claims fromaffected employees or regulatory action.

Essentially employers, as datacontrollers, are under an obligation toensure that they process personal dataabout their employees (whether held onmanual files or on computer) inaccordance with specified principlesincluding the following: a requirement toensure that data is accurate, up to date,and is not kept longer than is necessaryand a requirement that it is storedsecurely to avoid unlawful access oraccidental destruction or damage to it.

Employers are generally advised toensure they have some sort ofdocument retention policy in place andto ensure that staff are aware of theirdata protection obligations. Employerswill also need to provide certaininformation to the employees in respectof the data processing. A notification tothe Privacy Commission (the Belgian

data protection regulator) will often berequired. The notification is essentially aregistration of what data is processedand the purposes of the processing.

The processing of sensitive personaldata, (meaning data which reveals racialor ethnic origin, political opinions,religious or philosophical beliefs ortrade-union membership and dataconcerning sex life as well as judicialdata) can only be processed if theemployer can rely on one of thestatutory justifications for suchprocessing.

14.2 Employee Access to DataEmployees, as data subjects, have theright to make an access request. Thisentitles them, subject to certain limitedexceptions, to be told what data is heldabout them, how it has been obtainedand to whom it has been disclosed toand to be provided with a copy of theirpersonal data. There is a 45-day timelimit for responding to such a request.Subject access requests cover personaldata held in manual and electronicrecords such as e-mail. Subject accessrequests are uncommon and there is nostandard approach in respect of whetherfees are levied for the provision of thisinformation.

14.3 MonitoringThe monitoring of employee e-mail,Internet and telephone usage andClosed Circuit TV monitoring isregulated by the Privacy Law, amongother pieces of legislation. On 26 April2002, the National Labour Councilapproved a collective labour agreementwhich deals specifically with theprotection of employee privacy in thecontext of the monitoring of electroniccommunications data. This agreement isbinding on all employers.

Monitoring is permissible provided that itis carried out in accordance with thePrivacy Law principles and processingconditions. In addition, the collectivelabour agreement specifies thatmonitoring is only permitted for certainpurposes and that the infringement ofthe privacy of employees should beminimised; so for example, data shouldbe collected about the duration ofInternet connections rather than data

about individual sites visited. Expressemployee consent to monitoring willusually be required. In addition, boththe works council and the individualemployees should be made aware ofthe purpose for which the monitoring isbeing conducted. Where disciplinaryaction is a possible consequence ofanything discovered, this too should bemade clear to employees. The collectivelabour agreement sets out specificprocedural requirements where themonitoring gives rise to a need to linkthe data to a specific employee.

14.4 Transmission of data to thirdparties

An employer who wishes to provideemployee data to third parties must doso in accordance with the Privacy Lawprinciples and processing conditions.In many cases it may be necessary toobtain express consent to suchdisclosure in the absence of a legitimatebusiness purpose for the disclosure anddepending on the nature of theinformation in question and the locationof the third party. Where the third partyis based outside the EEA it should benoted that the Privacy Law prohibits thetransfer of data to a country outside theEEA unless that country ensures anadequate level of protection for personaldata or one of a series of limitedexceptions apply. In the context ofcommercial transactions whereemployee data is requested, care mustbe taken to comply with the PrivacyLaw. Where possible anonymised datashould be provided.



18

Employment and Benefits in the European UnionBulgaria

Bulgaria1. IntroductionA fundamental principle of the BulgarianConstitution is that labour is guaranteedand protected by the law. The right towork is recognized as a fundamentalright of citizens and the Bulgarian Stateis obliged to facilitate the exercise of thatright by all persons (including those withphysical or mental impairments). TheConstitution expressly prohibits forcedlabour and sets out the following basicrights for employees: (i) freedom tochoose employment; (ii) healthy and safeworking conditions; (iii) a minimumsalary; (iv) a remuneration correspondingto the work performed; (v) a right to restand leave. Each of these rights is to beexercised in accordance with therelevant legislative provisions.

The Labour Code is the principle sourceof law regulating the legal relationshipbetween an employer and an employeeincluding the following: addressing tradeunions and employers’ organizations,collective agreements, employmentcontracts, information and consultationrules, working time, leave, workdiscipline, disciplinary liability and otheremployer’s and employee’s liabilities,remuneration, health and safety andtermination of the employmentrelationship. The Labour Code has beenamended with a view to implementingthe relevant EU Directives applicable tolabour issues.

It is a fundamental principle of theLabour Code that the State must consultwith employees, employers and theirrepresentative organisations beforelabour legislation is implemented.This concept is referred to as “the socialdialogue”. Social dialogue is achievedby means of trilateral collaboration(the “tripartite principle”). Trilateralcollaboration is performed by theNational Council for Tripartite Co-operation (the NCTC) which is comprisedof representatives of the Council ofMinisters and the employees’ and theemployers’ representative organizations.

State control over the implementation oflabour legislation is executed by thespecial executive agency “GeneralLabour Inspectorate”.

It is not possible to contract out of thestatutory protection conferred onemployees, and contracts ofemployment or clauses of suchcontracts that are contrary to mandatorystatutory provisions or to collectiveagreements are null and void.

Some specific areas of employment law(e.g. health and safety at work,employment promotion, collective labourdisputes etc.) are governed by specificlegislation (for example Health andSafety at Work Act, EmploymentPromotion Act, Settlement of CollectiveLegal Disputes Act). The Labour Codeprovides that the legislative provisions ofsuch specific legislation prevail over themore general provisions of the LabourCode. In addition, certain labour issuesare regulated in more detail bysecondary legislation. It should also benoted that other legislation also containsspecific provisions regulatingemployment relationships, e.g. HigherEducation Act, Republic of BulgariaDefence and Armed Forces Act.

Bulgaria has been a member of theInternational Labour Organization since1920 and it has ratified numerousinternational treaties governing labourmatters such as forced labour, trade-union freedom, discrimination, minimumage for employment etc. Bulgaria ratifiedthe European Social Charter in 2000.Such international treaties take priorityover any conflicting provisions ofdomestic legislation.

Collective agreements are regulated bythe Labour Code and have a dualnature: on one hand they havecontractual effect and on the other handthey are a source of law in the sensethat they establish minimum rights andobligations in respect of certainemployee categories which are morefavourable for the relevant employeesthan the minimum terms and conditionsprescribed by the Labour Code.

The civil departments of the relevantDistrict Court settle labour disputesbetween employees and employers.Collective labour disputes betweenemployees’ organizations and employersare settled under the proceduresregulated by the Collective Labour

Disputes Settlement Act, i.e. throughnegotiations, mediation and/orarbitration, where the arbitration isperformed by the National Institute forConciliation and Arbitration.


2.1 GeneralThe terms “factory workers” (for bluecollar employees, who are directlyinvolved in production or other activitiesprincipally requiring manual work) and“office workers” (for white collaremployees, performing mainlyintellectual work) are used in the LabourCode to differentiate these twocategories from a purely linguistic pointof view. Bulgarian labour legislation doesnot include specific regulations providingfor differential treatment of blue andwhite-collar staff.

There are currently three labourcategories in Bulgaria: first, second andthird. These categories are significant forthe purposes of the right to retire.Employees who come within the first orsecond labour categories are entitled toretire earlier than employees in the thirdcategory.

2.2 DirectorsDirectors who manage and representcompanies perform their duties pursuantto management agreements. By theirlegal nature, those agreements are notcontracts of employment but “specialmandate” agreements, which areregulated by Bulgarian commercial andcivil law. For social insurance purposes(see further below) company directorsare treated as compulsory insuredpersons against all social insurancerisks.

2.3 OtherStatutory working time in Bulgaria is eighthours a day for a five-day working week.An employer and an employee mayagree on part-time employment providedthat the part-time employee is not treatedless favourably than a comparable full-time employee who performs the sameor similar work at the enterprise. Part-time employees enjoy the same rightsand have the same duties as employeesworking on a full-time basis, exceptwhere the law makes the enjoyment of


19

certain rights contingent on the durationof the time worked, length of service,qualifications possessed etc.

Part-time employment must bedistinguished from “reduced workingtime”. Reduced working time isestablished in relation to employees,performing their duties under specificconditions, where the risks to their lifeand health cannot be eliminated orreduced regardless of the measurestaken, but a reduction in the duration ofworking time can contain the risks tohealth. Secondary legislation prescribesthose areas of work subject to reducedworking time. Where there is a reductionin working time, the employee’sremuneration and other entitlementsmay not be reduced.

Fixed-term contracts of employmentmay be entered into: (i) for a period notexceeding three years, unless otherwiseprovided for by legislation; (ii) for theduration of a specific project; (iii) for thetemporary replacement of an employeewho is absent from work; (iv) for atemporary period until the position isfilled on a permanent basis following acompetitive examination; or (v) for afixed term of office. Employees underfixed term contracts of employmenthave the same rights and obligations asemployees under contracts of indefiniteduration. Fixed-term employees may notbe treated in a less favourable mannerthan comparable permanent employeesperforming the same or similar work atthe enterprise solely because of thefixed-term nature of the employmentrelationship except where certain rightsare contingent on the possession ofqualifications or the acquisition of skillsas a matter of law. Fixed-termemployment contracts are normallyentered into for casual, seasonal orshort-term work, as well as with newlyemployed persons in enterprises thathave been pronounced bankrupt or putinto liquidation. As an exception, a fixed-term employment contract may beconcluded for a period of more than oneyear for work that is not of a casual,seasonal or short-term nature.Any fixed-term employment contractconcluded in violation of thoseregulations will be treated as a contactof indefinite duration.

The Labour Code defines secondmentas the performance of labour dutiesoutside the place of the employee’spermanent work. The maximumpermissible period of secondment is30 calendar days. Secondment for aperiod in excess of 30 days requires theexpress written consent of theemployee. Pregnant women may not beseconded. Mothers of children who areunder the age of three may only beseconded with their written consent.

During a period of secondment theemployee is entitled to receive his/hergross salary plus a travelling allowancefor the secondment period.

The Civil Servants Act (the “CSA”)defines civil servants as persons holdingsalaried tenured positions in the stateadministration and assisting a body ofstate power in the exercise of its powers.

The CSA regulates the requirements thatmust be met by a person in order to beappointed as a civil servant. One of thekey requirements is that such a personmust be a Bulgarian citizen. Civilservants do not work under anemployment relationship regulated bythe Labour Code, but under a civil-service relationship that is governed bythe CSA. The establishment of a civil-service relationship is always precededby an open competition procedure.

The competent authority with anadministrative act of employmentappoints the person taking the positionof a civil servant and the civil-servicerelationship commences on the date onwhich the appointed person assumeshis/her duties. The civil-servicerelationship may be terminated inaccordance with, and for the reasonsspecified under, the procedures set outin the CSA.

3. Hiring3.1 RecruitmentEmployers are free to select and employpersonnel corresponding to theirparticular requirements provided that theselection and employment proceduresare not discriminatory.

Employers recruit via a variety ofsources (internet or media advertising,

personnel recruitment agencies etc).Since 1 January 2002 the State policyon employment has been governed bythe Employment Promotion Act. Thisestablished the National EmploymentAgency for the execution of the Statepolicy on employment promotion,protection of the labour market, trainingof unemployed persons, recruitment,mediation etc. Employers may at theirdiscretion inform the NationalEmployment Agency of vacant positionsand are further obliged to inform theAgency when such positions are filled orwhere a notified vacancy is withdrawnwithout being filled. In addition theAgency must be notified of anyunemployed persons who have refusedto accept a vacant position.

3.2 Work PermitsNon-Bulgarian citizens (“foreigners”) maywork in Bulgaria as employees orsecondees after obtaining a workpermit. A work permit must be issuedby the Employment Agency at therequest of a local employer or of thelocal person appointing the secondedforeigner. A work permit is not requiredby foreigners who have been grantedpermanent residence in the Republic ofBulgaria or by foreigners who have beengranted asylum, refugee or humanitarianstatus.

Work permits will be issued to foreignersin relation to positions where theoccupation does not require Bulgariancitizenship to be held and the followingconditions are satisfied: (i) the state,development and public interests of thenational labour market are satisfied; (ii)the total number of foreigners workingfor the local employer does not exceed10 per cent of the average annualnumber of Bulgarian citizens andforeigners with granted right of asylumor with recognized refugee status hiredunder an employment relationship withinthe last preceding twelve months; (iii) theconditions of work and pay offered arenot less favourable than the conditionsavailable to Bulgarian citizens for therelevant work category; and (iv) theremuneration meets national minimumwage requirements.

Condition (ii) above does not apply toany European Union Member State



20


citizens or citizens of other ContractingStates to the Agreement on theEuropean Economic Area. Bulgariastrictly applies the EU regulationspertaining to the free movement ofpeople.

Work permits are not required for EUcitizens to work in Bulgaria. They areallowed to enter freely into anemployment relationship with a localemployer; however, they will have toapply for a long-term residence permit.

4. DiscriminationThe Labour Code prohibits direct orindirect discrimination on grounds ofethnicity, origin, gender, sexualorientation, race, skin colour, age,political and religious convictions,affiliation to trade union and other publicorganisations and movements, familyand property status, existence of mentalor physical disabilities, as well asdifferences in the contract term and theduration of working time.

The special Protection AgainstDiscrimination Act (the “PADA”) alsoprohibits direct or indirect discriminationon the grounds of gender, race,nationality, ethnicity, human genome,citizenship, origin, religion or belief,education, convictions, politicalaffiliation, personal or social status,disability, age, sexual orientation, maritalstatus and property status.

Direct discrimination is legally defined asany less favourable treatment of aperson, on one of the prohibitedgrounds specified in PADA, than thetreatment another person is receiving,received, or would receive incomparable circumstances. Indirectdiscrimination arises where a person isplaced in a less favourable positioncompared to other persons through anapparently neutral provision, criterion orpractice, as an indirect consequence offalling within one of the protectedcategories specified in PADA unless thatprovision, criterion or practice isobjectively justified in view of a legal aimand the means of achieving this aim areappropriate and necessary.

Discrimination during a recruitmentprocess is expressly prohibited.

Employers are also obliged to ensureequal working conditions for allemployees, including equal pay for likework or work of equivalent value, equalopportunities for training with a view toimproving skills and qualifications, equalcriteria for terminating employmentcontracts and for disciplinary sanctions.One of the most significant obligationson an employer is the requirement toadapt the workplace to meet theparticular needs of disabled employeesunless the costs of such changes areunreasonably high.

Employers are not permitted to refuse toemploy a person on the grounds ofpregnancy, maternity or parentalresponsibility.

Harassment and sexual harassment areexpressly outlawed. Harassment is anyunwanted physical, verbal or otherconduct on one of the prohibitedgrounds aimed at, or resulting in, aviolation of a person’s dignity and thecreation of a hostile, offensive orintimidating environment. Sexualharassment is any unwanted physical,verbal or other conduct of a sexualnature, which violates dignity or honourand creates a hostile, offensive,degrading or intimidating environment.

An employer who receives a complaintfrom an employee who believes thathe/she is subject to harassment,including sexual harassment, in theworkplace, is obliged to immediatelyhold an inquiry, take measures to stopthe harassment, and to discipline anyemployee if he/she is found to havecaused the harassment.

PADA specifies limited situations inwhich different treatment will not amountto discrimination e.g. when the nature ofa particular activity or occupationdemands different treatment of personson the grounds of their gender or whendifferent treatment of persons on thegrounds of their religion is necessarywith regard to occupations in religiousinstitutions etc.

The Commission for Protection AgainstDiscrimination is established as anindependent institution for preventingdiscrimination ensuring equal

opportunities and ensuring compliancewith PADA and other legislativeprovisions regulating equal treatment.Every individual, legal entity or institutionmay bring a case to the Commission.The Commission may also initiate a casein circumstances where it becomesaware of discriminatory practices.

In the course of exercising its powers,the Commission (i) assesses whetherthere have been violations of equaltreatment legislation; (ii) can order thecessation of discriminatory treatmentand require the status quo to be re-established; (iii) can imposeadministrative sanctions andenforcement measures; and (iv) canissue mandatory directions forcompliance with equal treatmentlegislation. In certain cases theCommission can impose fines onindividuals and employing entitiesranging from BGN 250 to BGN 2,500depending on the nature of the violation.More severe sanctions may be availablein serious cases.

The decisions of the Commission aresubject to appeal to the SupremeAdministrative Court.


5.1 Freedom of ContractThe Labour Code regulates freedom ofcontract. Contracts of employmentestablishing terms and conditions, whichare less favourable for employees thanmandatory provisions of law or collectiveagreements, are null and void. Generally,neither the employer nor the employeemay unilaterally modify the employmentrelationship, although there are someexceptions provided for by law. If anemployee is transferred to another jobwithin the same enterprise, withoutchanging the specified place of work,the position or the amount of the basicwage this is not treated as amodification of the employmentrelationship. The employer mayunilaterally increase an employee’s pay.

5.2 FormThe Labour Code requires contracts ofemployment to be in writing. Theemployer is obliged to notify therespective territorial directorate of the


21

National Revenue Agency within threedays of concluding or amending theemployment contract and within sevendays of its termination.

5.3 Trial PeriodsThe Labour Code expressly regulatescontracts of employment with a trialperiod. Where the work requires theabilities of the employee to be assessed,his or her permanent appointment maybe preceded by a contract ofemployment with a trial period of up tosix months. Such a contract may alsobe concluded where the employeewants to verify whether the work issuitable for him/her. Such a trial periodcontract must expressly state for whosebenefit the trial period is beingestablished. Where the contract doesnot include such a statement the trialperiod is presumed to be for the benefitof both parties. During the trial period,the parties have the same rights andobligations as under a permanentcontract of employment. After the expiryof the trial period no other trial periodcontract may be concluded between thesame employer and employee for thesame type of work at the sameestablishment. The party for whosebenefit the contract is concluded mayterminate it without notice at any timeprior to the expiry of the trial period. Ifthe contract is not terminated until theexpiry of the trial period it is then treatedas a permanent contract ofemployment.


Under the provisions of the LabourCode an employee is obliged to be loyalto the employer, not to abuse theemployer’s trust, not to disclose anyconfidential data and to protect thereputation and goodwill of theenterprise.

An express non-competition clause maybe included in a contract ofemployment. It should be noted,however, that a non-compete clause isgenerally construed as contrary to publicpolicy and will therefore only beenforceable if the employerdemonstrates that the clause is areasonable means of protecting anidentified legitimate interest.

5.5 Intellectual PropertyThe general rule under the Copyrightand Neighbouring Rights Act is thatintellectual property created by anemployee during the course of anemployment relationship belongs to theauthor. The employer is, however,granted the exclusive right to use suchintellectual property for its ownpurposes, without permission from theauthor and without payingcompensation, unless the contract ofemployment provides otherwise. Theemployer is allowed to exercise thatright in a manner that is consistent withthe usual business activity of theenterprise.

6. Pay and Benefits6.1 Basic PayThe national minimum wage isdetermined by the Council of Ministersannually at the beginning of the relevantyear and the minimum wage applieswith effect from 1 January of that year.The minimum monthly wage for 2007 isBGN 180 and the minimum hourly wageBGN 1.07 (for an eight hour workingday, five day working week).

Collective agreements in some industrialand business sectors also establishmore generous minimum remunerationlevels for the relevant industry sectors.

Employers are not obliged to index link.The employer and the employee mayagree on index linking when concludingan individual contract of employment orindex linking may be agreed in acollective labour agreement.

Normally the salaries in the so-called“budget sphere” (i.e. institutions andestablishments financed by the StateBudget) are indexed on an annual basispursuant to the respective State BudgetAct.

6.2 Private PensionsSupplementary social insurance inBulgaria is implemented throughparticipation in universal and/oroccupational pension funds,supplementary voluntary retirementinsurance funds and/or funds forsupplementary voluntary retirementinsurance under occupational schemes,and in supplementary voluntary

unemployment or vocational-traininginsurance funds, which are incorporatedand managed by insurance companieslicensed according to the procedureestablished by the Social InsuranceCode. The Bulgarian State regulates theactivity of supplementary socialinsurance companies and funds for thepurpose of protecting the interests ofthe insured persons and the pensioners.The Financial Supervision Commissionregulates the activity of supplementarysocial insurance companies and funds.

Current Bulgarian legislation givesemployers the opportunity to pay socialinsurance contributions for theiremployees to supplementary socialinsurance companies and funds andmany employers do so. Employers arenot, however, legally obliged to pay suchcontributions for the supplementarysocial insurance of their employees.

6.3 Incentive SchemesBulgarian law does not specificallyregulate share schemes and they arenot mandatory. However, such schemesmay be operated as a means ofincentivising employees or may becovered by collective agreements.

6.4 Fringe BenefitsFringe benefits (e.g. company car,company mobile phone etc.) are notmandatory. Such benefits are normallyprovided to managerial staff.Individual contracts of employment willregulate the nature of any suchbenefits to be provided.

6.5 DeductionsEmployers are obliged to deduct on amonthly basis income tax, the employees’social security contributions (these arepaid together with the employer’s socialsecurity contributions) and mandatoryhealth insurance contributions.The employer may also be obliged tomake deductions from the employee’sremuneration in cases where there isa valid court order in respect of suchdeductions.

7. Social security7.1 CoverageThe social security system in Bulgaria isadministered by the State. The SocialInsurance Code requires Bulgarian



22


employees to be compulsorily insuredagainst all social risks where they areemployed for more than five workingdays or 40 hours within one calendarmonth, irrespective of the nature andduration of their work and the method ofcalculating and paying theirremuneration. Civil servants also have tobe insured against all social insurancerisks.

The Public social insurance system inBulgaria provides benefits, allowancesand pensions for: (i) temporary disability;(ii) temporarily reduced working capacity;(iii) disablement; (iv) maternity;(v) unemployment; (vi) old age; and(vii) death.

These benefits are funded through thesocial security payments of the employerand the employee, the amounts ofwhich are regulated on an annual basis.

The mandatory health insurance inBulgaria guarantees insured personsaccess to medical assistance and a rightto choose a general practitioner anddentist. The amount of the healthinsurance contribution is determined onan annual basis.

Employees may also subscribe tovoluntary health insurance. Suchinsurance is provided by joint-stockcompanies, registered and licensedunder the Commerce Act.

7.2 ContributionsContribution rates for public socialinsurance funds are determined by theSocial Insurance Code and range frombetween 32.5 per cent and 23 per centof remuneration depending on whatwork category (one, two or three) theemployee is in and whether theinsurance is against all risks or providesmore limited cover.

In addition to this, a further contributionis made in relation to employment injuryand occupational disease that variesfrom 0.4 to 1.1 per cent ofremuneration. The Public SocialInsurance Budget Act determines thisfor the relevant year, according to thearea of economic activity.

Social insurance contributions arecalculated on the amount of the grossmonthly remuneration received and thecontribution must not be less than thenational minimum wage. Socialinsurance contributions are splitbetween the social insurancecontributors (i.e. the employers) and theinsured persons (i.e. the employees) inthe following ratio:

– For 2007: 65 to 35

– For 2008: 60 to 40

– For 2009: 55 to 45

– For 2010 and thereafter: 50 to 50

The rate of the mandatory healthinsurance contribution for 2007 is sixper cent and the payment of healthinsurance contributions are sharedbetween the employer and theemployee in the following ratio:

– For 2007: 65 to 35

– For 2008: 60 to 40

– For 2009: 55 to 45

– For 2010 and thereafter: 50 to 50

8. Hours of WorkThe normal working week in Bulgariaconsists of five days with a maximumdaily working time of eight hours and amaximum weekly working time of40 hours. The Labour Code sets outthe circumstances when these dailyand weekly maximum limits can beextended. Such extensions arepermissible for a period of not morethan 60 working days in one calendaryear and not more than 20 successiveworking days.

Lower maximum reduced working timelimits exist in relation to certain jobswhere the risks to the employee’s lifeand health cannot be completelyeliminated but a reduction in the workingtime leads to containment of those risks.

Working hours are established by theinternal activity rules of each enterprise.Flexible working time may beestablished where the organization of

work so allows. An employer, afterconsulting with trade unionrepresentatives and employers’representatives, may establish open-ended working hours for certainpositions where the nature of the workso requires. Employees to whom open-ended working time applies are obligedto continue performing their dutiesbeyond normal working hours.

Work between 10.00 p.m. and 6.00a.m. (between 8.00 p.m. and 6.00 a.m.for employees under 18) is legallydefined as night work. The maximumdaily limit for night work is seven hoursand the maximum weekly limit is35 hours. Night work is prohibited foremployees under the age of 18,pregnant women, mothers of childrenunder the age of six and mothers ofdisabled children (except with theirwritten consent).

Shift work is also permissible if thenature of the production process sorequires, however, assigning work duringtwo successive work shifts is prohibited.

The general rule is that overtime (i.e.working hours in excess of normalworking hours) is prohibited and ispermissible only as an exception in thefollowing cases strictly prescribed by theLabour Code: (i) in the case of workrelated to national defence;(ii) to prevent, manage and mitigate theeffects of crises and disasters; (iii) for theurgent reparation of public utilities andtransport infrastructure; (iv) for theperformance of emergency repair workto premises, machinery or equipment;(v) in cases where work which ifinterrupted would endanger health,human life or lead to the damage ofmachines and materials. The maximumpermissible duration of overtime workperformed by an employee may notexceed 150 hours within one calendaryear, 30 hours of day work or 20 hoursof night work within one calendar month,six hours of day work or four hours ofnight work during one calendar week,three hours of day work and two hoursof night work during two successiveworking days. These limits may beexceeded only in the circumstancesspecified in the Labour Code. Overtimeis prohibited for certain categories of


23

employee e.g. persons under the age of18, pregnant women etc.

The rate of pay for overtime work isagreed between employer and employeebut may not be less than (i) 50 per cent ofthe normal rate of pay for work onworking days; (ii) 75 per cent of thenormal rate of pay for work on weekends;or (iii) 100 per cent of the normal rate ofpay for work on public holidays.

9. Holidays and Time Off9.1 HolidaysThe public holidays in Bulgaria are:1 January; 3 March - National Day;1 May; 6 May; 24 May; 6 September;22 September; 1 November (non-studyday for all educational establishments);24 December - Christmas Eve; 25 and26 December - Christmas; and Easter -two days (Sunday and Monday)depending on when Easter is celebratedin the respective year.

The basic annual paid leave to whichevery employee is entitled by virtue ofthe Labour Code is not less than20 working days. Longer basic annualpaid leave may be agreed by collectiveagreement. In the first year ofemployment, an employee may onlytake paid annual leave after acquiring atleast eight months’ service. Certaincategories of employee are entitled toextended paid annual leave, in additionto the basic annual entitlement, i.e. anadditional five days paid leave.

Payment in lieu of untaken annual leavemay only be made upon termination ofemployment.

9.2 Family LeaveFemale employees are entitled topregnancy and childbirth leave of315 days for each child. 45 days ofthis leave must be used before theconfinement. In addition, an employeemay take childcare leave until the childattains the age of two. This leave isavailable in respect of the first, secondand third child. For subsequent children,childcare leave of six months is availablefor each additional child.

Benefit payment will be made duringpregnancy and childbirth leave providedthat the employee has made the

requisite social insurance contributionsfor at least six months. The daily cashbenefit for pregnancy and childbirthleave is 90 per cent of the average dailyremuneration or of the contributoryincome as determined under Article 41of the Social Insurance Code and maynot exceed the average daily netremuneration for the period for whichthe benefit is calculated. The qualifyingconditions for childcare benefit are thesame conditions as those for thepregnancy and childbirth benefit.Childcare benefit is paid monthly andthe amount is fixed by the Public SocialInsurance Budget Act. Childcare leavemay be used by the father of the child orby one of the child’s grandparents;however, in these cases the child’smother must consent to leave beingused by such persons.

Pregnancy childbirth and childcarepayments are paid by the relevant regionaloffice of the National Social SecurityInstitute, i.e. by the State Budget.

9.3 IllnessPersons insured against all socialinsurance risks are entitled to thefollowing benefits (amongst others):

■ cash compensation for, amongstother things, temporary disabilitythrough general sickness andoccupational disease, urgentmedical examinations, preventivecare and rehabilitation;

■ cash allowances for disability as aresult of general sickness, preventivecare and rehabilitation and technicalaids related to the impairment; and

■ pensions for disability arising fromworkplace injury, occupationaldisease or general sickness.

These Social Insurance Code paymentsact as an income substitute whereemployment income is lost or reduced.

10. Health and Safety10.1 AccidentsThe Health and Safety at Work Actregulates health and safety at work.

Employers are obliged to ensure healthand safety at work so that any risks to

the employees’ health and safety areeliminated, restricted or mitigated. Everyemployer must establish health andsafety rules and these must comply withthe legislative provisions. Employers arealso obliged to provide medical servicesfor the employees and free protectiveclothing and equipment for employeeswho work in conditions where there isrisk to their health and safety.Employees also have to be instructedand trained on safe methods of work.

10.2 Health and Safety ConsultationWorking Conditions Committees have tobe established in any enterprise whoseworkforce exceeds 50. Suchcommittees may not have more than10 members, half of them beingemployees’ representatives and theother half - representatives of theemployer. In large companies suchcommittees may be established not onlyfor the enterprise but also for itsconstituent departments.

The purpose of the Working ConditionsCommittee is to provide a forum for theregular discussion of health and safetyissues, to consider recommendations forimproving health and safety and tocheck that health and safety obligationsare being complied with.

11. Industrial Relations11.1 Trade UnionsEmployees are free to form trade unionsand to join and leave them at will subjectonly to the terms of the trade union’sstatutes. Trade unions protect andpromote employees’ interests throughcollective bargaining, participation intrilateral collaboration, strikes and otherlawful action. Every organisation formedas a result of employees exercising theirright to association under the LabourCode is defined as a trade union, evenin cases where it is the only trade unionoperating in a particular enterprise. Sucha trade union must be recognised by theemployer and there is no minimummembership requirement in order for atrade union to be qualified to representthe employees’ rights and interests forthe purposes of concluding a collectiveagreement with the relevant employer.

In order to be recognized as arepresentative organization of employees



24


at a national level, a trade union musthave: (i) at least 50,000 members; (ii) atleast 50 organisations with not fewerthan five members each in more thanhalf of the industries designated by theCouncil of Ministers in accordance withthe National Classification of EconomicActivities; (iii) local bodies in more thanhalf of the municipalities in the countryand a national governing body; and(iv) legal capacity. National recognition isa pre-requisite for a trade union toparticipate in the trilateral cooperationand the social dialogue as regulated bythe Labour Code. Thus, trade unionshave an opportunity to influence thesocial and economic development of thecountry.

11.2 Collective AgreementsThe subject matter and contents ofcollective agreements are regulatedgenerally by the Labour Code.

Bulgarian labour legislation establishesmandatory minimum standards forprotecting employees’ rights andinterests. More beneficial rights andstandards can, however, be agreedunder collective agreement. The mainpurpose of collective agreements is toregulate in more detail the specificrelationship between the employer andemployees in the context of the workingconditions in any particular industrialsector.

The parties to a collective agreement arethe employer and the trade union. Inorder to be valid, a collective agreementmust be in writing. It must be registeredat the labour inspectorate in the areawhere the employer’s registered office islocated.

The procedure for drafting, negotiatingand executing a collective agreement isregulated by the Labour Code.A collective agreement will have effectin relation to the employees who aremembers of the trade union which isparty to the agreement. Thoseemployees who are not members of thetrade union may accede to the collectiveagreement concluded by the trade unionby written application to the employer orthe leadership in accordance with thepre-determined procedure set out in thecollective agreement.

An employer is obliged to notify itsemployees of all collective agreements,applicable to the enterprise or a branchor industrial sector level and to havecopies of the full texts of thoseagreements at the employees’ disposal.

Only one collective agreement may beconcluded at an enterprise, branch orindustry level.

11.3 Trade DisputesThere is no legal definition of “tradedisputes” (also referred to as a collectivelabour disputes).

Generally, such disputes arise in thecontext of the implementation, variationor termination of a collective agreement,but disputes may also arise in relation toother issues including issues relating tothe employment. There are two types oftrade dispute: (i) disputes relating torights arising from legislation or collectiveagreements; and (ii) disputes relating tointerests. An “interest” dispute arisesfrom a difference of opinion between theparties in relation to the expediency ofcertain decisions affecting the interestsof the parties. A competent court canresolve “Rights” disputes, whereasdisputes relating to interests cannot bebrought to a court for resolution.

The Settlement of Collective LabourDisputes Act (the “SCLDA”) regulatesthe means by which a trade dispute canbe resolved. It provides that resolutioncan be achieved via the followingmeans: (i) negotiation; (ii) mediationand/or voluntary arbitration (by NationalConciliation and Arbitration Institute);and (iii) strike action.

In order for a strike to be lawful it mustbe conducted in strict conformity withthe procedures prescribed by theSCLDA which apply to both parties tothe dispute. Both the employer and theinterested employees are entitled toseek a declaration from the Court thatthe strike is illegal.

The SCLDA prohibits an employer fromdismissing employees for the purpose ofpreventing or ending a strike. Theemployer is also prohibited fromemploying new workers in place ofthose on strike, except in limitedprescribed circumstances.


An employer is obliged to provide theinformation required by the law (e.g.information on the collective agreementswhich are applicable to the enterprise,current financial and business status ofthe enterprise which may affect theexecution of a collective agreement,proposed collective agreement, intendedmergers resulting in change of employeretc.) to the trade unions and to theemployees’ representatives at theenterprise, as well as to consult them(e.g. in cases of collective dismissals,mergers etc.).

The trade unions and the employees’representatives are obliged to make theemployees aware of informationreceived from the employer, and takeinto account employees’ opinions on therelevant issues when conductingconsultations.

Employees are also entitled to prompt,reliable and intelligible information aboutthe economic and financial situation ofthe employer, which is relevant to theirlabour rights and duties.

Employees also have the right to beprovided with information in the contextof collective dismissals and the right tobe informed and consulted in thecontext of a business transfer(see further below).

12. Acquisitions andMergers

12.1 GeneralThe employment relationship with anemployee is not terminated in the eventof a change of employer in any of thefollowing situations: (i) as a result of thecreation of a new enterprise following amerger of enterprises; (ii) a mergerfollowing the acquisition of oneenterprise by another; (iii) the distributionof the operations of one enterpriseamong two or more enterprises; (iv) thetransfer of part of a business to another;(v) a change of the legal status of abusiness organisation; (vi) a change ofownership of all or part of a business;(vii) the cession or transfer of activityfrom one business to another (includinga transfer of tangible assets); and (viii) inthe context of the grant or transfer of a


25

lease or franchise. The two employersare jointly liable to the employee inrespect of any employment obligationsthat arose prior to the change of theemployer. The terms and conditions ofthe employment relationship remainunchanged following such a transfer toa new employer.


Prior to a transfer to a new employer,the Labour Code requires the transferoremployer and the transferee employer toinform the trade unions’ representativesand the employees’ representatives atthe enterprises of: (i) the proposedchange and the date of the transfer;(ii) the reasons for the transfer; (iii) thepossible legal, economic and socialimplications of the transfer for theemployees; and (iv) the measuresenvisaged in relation to the employees inrelation to the transfer.

The transferor employer is obliged toprovide the above information no laterthan two months before the transfertakes place. The transferee employer isequally obliged to provide theinformation in good time and in anyevent no later than two months prior tothe transfer.

If either transferor or transferee employerenvisages that measures will be taken inrelation to their respective employees inconnection with the transfer, it is obligedto consult the trade unions’representatives and employees’representatives in good time in relationto the measures and to make efforts toreach an agreement in respect of suchmeasures. In practice it is recommendedthat the consultation process becompleted prior to completion of thetransaction. If an employer fails to fulfilits information and consultationobligations, the trade unions’representatives and the employees’representatives or the employeesthemselves can notify the GeneralLabour Inspectorate. A fine may beimposed by the General LabourInspectorate from BGN 1500 to BGN5000. The General Labour Inspectoratemay also issue mandatory prescriptionsto the employer to end the infringementof the consultation obligations, for

example, a requirement to provide theemployees with the information requiredor to conclude an agreement with theemployees in respect of the measuresthat will be taken in connection with thetransfer.

13. Termination13.1 Individual TerminationA contract of employment may beterminated in accordance with one ofthe following scenarios:

■ By written agreement between theemployer and the employee;

■ By prior written notice;

■ Summarily without prior writtennotice (summary termination isstrictly regulated);

■ Upon expiry of a fixed term contract;or

■ Upon written notice during a trialperiod (by the party in whose favourthe trial period is agreed).

A fixed term contract will terminateautomatically upon expiry of the agreedterm or the completion of a specifiedassignment, as the case may be. Noprior notice is required.

An employer wishing to terminate anemployment contract must ensure itcomplies with applicable statutoryrequirements as well as the contractualrequirements and ensure that anyapplicable procedures are strictlyfollowed.

13.2 NoticeThe Bulgarian Labour Code differentiatesthe legal grounds on which an employeemay terminate his/her employmentcontract with written notice and thegrounds on which the employer isentitled to do so. The general rule is thatthe notice period is the same foremployer and employee. Contracts ofemployment for an indefinite term maybe terminated with 30 days’ writtennotice. However, the parties may agreeon a longer notice period, not in excessof three months. Fixed term contractsmay be terminated with up to threemonths’ written notice but the notice

cannot be longer than the unexpired partof the fixed term. Notice starts to run onthe day after the notice is received.

An employee may give notice for anyreason he/she wishes. However, anemployer may only terminate thecontract of employment in thecircumstances set out in the LabourCode.

Both the employee and the employermay summarily terminate the contract ofemployment without notice in thecircumstances listed in the LabourCode.

13.3 Reasons for DismissalAn employee may give notice oftermination without being obliged to tellthe employer the reason for doing so.An employer, however, may only givenotice of termination in thecircumstances listed in the Labour Codeas follows:

■ Upon closure of the enterprise;

■ Upon closure of part of theenterprise or a reduction inworkforce;

■ Where there is a reduction in thevolume of work;

■ When work is suspended for morethan 15 working days;

■ Where the employee lacks thecapacity to perform the work;

■ Where the employee does notpossess the necessary qualificationsto perform the role;

■ Where an employee refuses torelocate when the enterprise ordivision in which he/she worksrelocates;

■ Where the employee’s post must bevacated in order to reinstate awrongfully dismissed employee, whopreviously occupied that position;

■ Where the employee’s post must bevacated in order to allow the returnof an employee who previouslyoccupied the post where he hasbeen discharged from military



26


service early or where conscriptionhas been deferred;

■ Where an employee becomesentitled to contributory-service andretirement-age pensions uponattainment of the age of 65 years;

■ Where the requirements of a rolechange and the employee does notsatisfy those requirements; and/or

■ If the performance of theemployment contract is objectivelyimpossible.

In addition to the above cases,employees can be dismissed with noticeif they are to enter into a managementagreement because they are assumingthe role of a director within theenterprise. Such a dismissal may onlybe effected within nine months of thecommencement of the managementagreement.

An employer may summarily terminatethe contract of employment in a numberof circumstances including the followingcases:

■ Where the employee has beendisqualified from practising theprofession or from occupying theposition to which that worker hasbeen appointed;

■ If an employee is divested of anacademic qualification where thecontract was concluded with regardto qualification; or

■ The employee is dismissed formisconduct.

An employer must prove the existenceof one of the lawful grounds fordismissal and that the dismissal hasbeen effected following the legallyprescribed procedure. Thecompensations which are payable incase of dismissal are also strictlyregulated by the Labour Code.

An employee may object to thedismissal claiming that it is unjust eitherthrough filing a petition with theemployer, or by lodging a claim of unjustdismissal at Court. There is no term

within which the employee must file thepetition with the employer and there isno term within which the employer mustrespond to the petition. In practice it isnormal for this procedure to be initiatedand finalised shortly after the dismissal.An employee must file a claim at Courtwithin two months of the date of thealleged unjust dismissal.

13.4 Special ProtectionSpecial rules apply to the dismissals ofcertain categories of employee -including mothers of children under theage of three; employees who havecommenced statutory leave etc. Theprior written approval of the relevantLabour Inspectorate must be obtainedbefore dismissing an employee who fallswithin one of the protected categories.

An employee who holds a trade unionpost at an enterprise sector or nationallevel may only be dismissed during theterm of the post and for a period of sixmonths thereafter with the prior consentof the central leadership of the tradeunion concerned.

13.5 Closures and Collective Dismissals“Collective dismissals” are statutorilydefined as dismissals effected by theemployer for one or more reasonsunrelated to the individual employee,where the number of dismissals is: (i) atleast 10 in an enterprise employingbetween 20 and 99 employees duringthe month preceding the collectivedismissals and the dismissals are carriedout over a period of 30 days; (ii) at least10 per cent of the number of employeesin an enterprise employing between 100and 299 employees during the monthpreceding the collective dismissals andthe dismissals are carried out over aperiod of 30 days; (iii) at least 30 in anenterprise employing 300 employees ormore during the month preceding thecollective dismissals and the dismissalsare carried out over a period of 30 days;or (iv) at least 20 in an enterprise,irrespective of the number of employeesand the dismissals are carried out over aperiod of 90 days. If an employer hasdismissed at least five employees withinthe periods specified at (i) to (iii) above,each subsequent termination ofemployment which is for a reasonunrelated to the individual employee has

to be aggregated with the precedingdismissals for the purposes ofestablishing whether is a “collectiveredundancy situation”.

The Labour Code and EmploymentPromotion Act regulate the collectivedismissal notification procedures.

The employer must start consultationswith the trade union representatives andwith the employees’ representatives notlater than 45 days before the saiddismissals are to take effect, with a viewto reaching agreement with therepresentatives on how to avoid orreduce the number of dismissals and tomitigate the consequences of thesedismissals. Prior to the consultation, theemployer has to provide the trade unionrepresentatives and the employees’representatives with written informationsetting out the reasons for the proposeddismissals, the number and categoriesof employee to be dismissed, and theredundancy selection. The employermust also forward a copy of theinformation to the competent division ofthe National Employment Agency withinthree days of providing this information.The proposed redundancies cannot takeeffect earlier than 30 days after theNational Employment Agency is notified,without prejudice to the notice periods.The National Employment Agency mustbe notified of the planned redundanciesnot later than 30 days prior to notice ofthe redundancies being given. In caseswhere there are longer notice periods inthe individual employment agreements,those notice periods should beobserved (or compensation paid),irrespective of the obligation of theemployer to notify the NationalEmployment Agency.

An employee is entitled to compensationif his/her dismissal is as a consequenceof any of the following: closure of all orpart of the enterprise, reduction inworkforce or in the volume of work andsuspension of work for more than15 working days. The compensation isequal to the employee’s grossremuneration for the period ofunemployment subject to a maximum ofone month of remuneration.Compensation for a longer period maybe available where provided for by


27

statute, collective agreement or by theindividual employment contract.

14. Data Protection14.1 Employment RecordsAn employer’s collection, retention andprocessing of information and dataabout its employees, is regulated by thePersonnel Data Protection Act (the“PDPA”) which implements the DataProtection Directive 95/46/EC.

The PDPA defines “personal dataprocessing” as collecting, recording,organizing, keeping, adapting oramending, restoring, consulting, using,disclosing, updating, combining,blocking, deleting or destroying personaldata. All employers are regarded aspersonal data administrators. Employersmust ensure that personal dataprocessing is performed strictly inaccordance with the principles and forthe purposes prescribed by statute.

14.2 Employee Access to DataEmployees have a right to access theirpersonal data, which is being processedby the public data administratorprovided that third party rights or otherinterests pertaining to national securityand public order would not be harmedby such access.

14.3 MonitoringThe Constitution provides that thefreedom and confidentiality ofcorrespondence is inviolable. The onlyexception to this rule is wheremonitoring occurs with express judicialconsent in circumstances where it isnecessary for the purposes of detectingor preventing crime. It is also possible toincorporate monitoring clauses intoindividual employment contracts,stipulating that computer systems areprovided exclusively for work purposesand accordingly the employer has theright to access the employee’scommunications that are not marked aspersonal. By executing the contract ofemployment the employee grantshis/her explicit consent to suchmonitoring.

The Constitution provides that no onemay be followed, photographed, filmed,recorded, or subjected to similar actionswithout their knowledge or where they

have expressed their disapproval exceptas provided by legislation. Videomonitoring systems may be installed inthe workplace with the express consentof the employees who will be filmed.Video monitoring may be also installed ifit is for the purpose of protection ofhuman life and safeguarding assets andthe persons who will be filmed are dulynotified.


The transmission of personal data bythe employer (as data administrators) toany third party is permitted in thecircumstances set out in the PersonalData Protection Act. Generally, these arethe same circumstances in whichpersonal data may be processed.

The transfer of personal data to anyEuropean Union Member State or anyEuropean Economic Area membercountry is permitted subject tocompliance with the requirements of thePDPA. The transfer of personal data to athird country is permitted only in caseswhere the destination country ensuresan adequate level of personal dataprotection within its territory. Theadequacy of the level of protection ofpersonal data afforded by non-EEC/EEAcountries is assessed by theCommission for Personal DataProtection having regard to all thecircumstances including the nature ofdata, the purpose and duration of theirprocessing and the legal basis for andsecurity measures provided in thatcountry. That assessment should notapply where the European Commissionassessment on the adequacy ofpersonal data protection is respected.

Personal data may also be transferred tonon-EEC/EEA countries in the followingcases: (i) the individual to whom suchdata relates has given his or her explicitconsent; (ii) the transfer is necessary forthe performance of a contract executedbetween the individual and the dataadministrator or is being performed atsuch person’s request; (iii) the transfer isnecessary for the performance of acontract executed in the interest of theindividual between the dataadministrator and a third party; (iv) thetransfer is for the exercising of any

function required by law, or is necessaryfor the purposes of establishing,exercising, or defending legal rights;(v) the transfer is necessary in order toprotect the life and health of the datasubject; or (vi) the transfer concernsdata which is openly accessible to thepublic.



28

Employment and Benefits in the European UnionCyprus

Cyprus1. IntroductionLabour law in Cyprus is an amalgam ofcommon law and statute law.Employment relationships are primarilygoverned by ordinary contract lawprinciples and supplemented whereappropriate by statutory rights andobligations. Industrial relations in Cyprusare regulated by a number of statutes,the main one being the Termination ofEmployment Law and the AnnualHoliday with Payment Law. Cyprus has,in addition, ratified a great number ofILO Conventions.

Trade unions and employers’organizations have generally adopted aresponsible attitude. Successivegovernment’s policies have adopted theapproach of keeping out of disputes andpromoting the idea that labour-management relations are first andforemost the business of the partiesthemselves; and seeking the activeparticipation of workers and employers inthe formulation and implementation ofsocial and economic policies, throughtripartite bodies. Effecting proceduralagreements for the settlement ofdisputes has contributed immensely toIndustrial relations stability on the Island.The Industrial Relations Service of theMinistry of Labour has also played aninstrumental role in maintaining industrialpeace through the development andpreservation of sound industrial relations.

Although mediation has becomepractically the only way of providing helpfor the resolution of disputes, the twosides may still resort to arbitration,directly or after mediation.


2.1 GeneralThe law does not draw any distinctionbetween blue and white collar employees.

3. Hiring3.1 RecruitmentEmployees are typically recruited viaadvertising in newspapers and journals.To a lesser extent employees may berecruited through recruitment agenciesand internal advertising.

3.2 Work PermitsIt is very difficult for a non-Cypriot, otherthan a E.U. citizen, to obtain a workpermit to work in Cyprus for a localemployer. In order for a work permit tobe granted, it must be shown that,because of qualifications and know-how,no Cypriots are readily available for thatparticular post. The process issupervised by the Ministry of Labourthrough the local Labour Office. Workpermits are usually given for six months,and they are renewable. EU citizens arefreely able to work and do not need toobtain any work permits.

In the case of non-Cypriots (excludingE.U. citizens) employed by internationalbusiness companies, obtaining a workpermit for the first six months is a simpleprocedure. Renewals are given annuallythereafter, provided that the employeeand employer comply with theregulations imposed by the Central Bankand Immigration authorities.

Foreign workers are divided into twoclasses, “executive” staff and “non-executive” staff. The term “executive”includes expatriates registered asdirectors or partners with the Registrar ofCompanies and Official Receiver. It alsoincludes general managers of subsidiariesand branches of publicly quotedoverseas companies, as well asdepartmental managers of internationalbusiness companies operating fromCyprus for at least two years inaccordance with the conditions andrequirements of the Central Bank ofCyprus. International business companiesare allowed to employ a maximum ofthree executives, unless they persuadethe Central Bank that a greater number isjustified. An expatriate who wishes to beemployed in an executive position must:

■ Be at least 24 years old;

■ Have the necessary qualifications;and

■ Receive appropriate remuneration(the minimum acceptable annualsalary for newly appointedexecutives is CY£24,000). Thisamount may be adjusted annually bythe authorities according tofluctuations in the salaries’ index.

Expatriates employed in professional,administrative, managerial, technical, orclerical positions are classified as “non-executive” personnel. “Non-executive”staff must be recruited from withinCyprus. If all formal procedures arefollowed, such as announcing a positionin the local press, and no suitableCypriot candidates can be found,international business companies areallowed to employ expatriates for theposition.

The Migration Officer at the Ministry ofInterior is responsible for the initial grantand subsequent renewals of TemporaryResidence and Employment (TRE)permits granted to all expatriatesemployed by international businesscompanies in Cyprus. Any TRE permitscan be revoked by the Minister of theInterior if he deems it to be in the publicinterest; and will be consideredautomatically cancelled, if theconditions under which it was grantedcease to exist.

The application for an executive’s FirstTemporary Residence Permit is made tothe Civil Registry and MigrationDepartment. The Civil Registry andMigration Department issues to theapplicant executive his first TemporaryResidence Permit within one month,unless his case warrants furtherconsideration.

For the renewal of the TemporaryResidence and Work Permit of aliens, itis necessary to submit an application onForm M.61 through the District Aliensand Immigration Branch of the Policeand to pay a fee of CY£20.

International business companies shouldinform the Central Bank, the Migrationofficer, and the Department of Customsas soon as any of their expatriate staffresign or are no longer in theiremployment.

4. DiscriminationAll forms of discrimination are prohibitedby Article 28 of the Constitutionincluding discrimination on the groundsof sexual orientation, age and religion. Inaddition to Article 28, a number of otherlaws have been implemented aimed atthe elimination of sex discrimination in


29

respect of equal pay and equaltreatment. The source of these laws hasbeen certain international conventions,most notably the ILO Conventions,which the Republic of Cyprus hasratified. In addition, case law has offeredsome assistance towards thedevelopment of the law, albeit of limitedimpact.

The Cyprus Government has alsoaccepted Article 19 of the RevisedEuropean Social Charter, whichprovides, inter alia, for no less favourabletreatment of migrant workers than thatof nationals.

A number of additional measures aimedat removing discrimination have alsobeen implemented:

■ Discrimination in social insurancelegislation had been abolishedalmost completely.

■ Maternity protection legislation hasbeen improved.

■ The health and safety of pregnantwomen and nursing mothers at thework place are better protected.

■ A pioneering scheme for parentalleave and for leave for reasons offorce majeure has been introduced.

■ Equal treatment in employmentpensions has been secured.

■ Equality in pay, not only for the sameor similar work, but also for work ofequal value has been secured.

If the employer breaches the obligationof equal pay for equal work, he is guiltyof a criminal offence and he could face afine of up to CY£2,000. Legislation alsosuspends the effect of any contractualterms discriminating against women.

Dismissal of and/or discriminationagainst an employee who hascomplained, or given evidence, of abreach of the equal pay legislation bythe employer is unlawful.

Although the ILO Convention ondiscrimination in employment andoccupation has been incorporated in

Cypriot legislation, unfortunately, nomeasures have, to date, been taken toimplement these provisions. In relationto pre-employment discriminationmatters again due to lack ofimplementing legislation, there is, inessence, no protection and,consequently, no remedy.

Equal Pay claims may be brought beforethe Industrial Disputes Court. Ifsuccessful, the Court may make adeclaratory judgment; give directions forthe termination of the discrimination; oraward compensation to cover damagesand order the employer to make up theshortfall from the date that thediscriminatory practice arose.

The Equal Pay and Pregnancy Laws docreate criminal offences. This is howeverof no value to the victim in financialterms. It appears that the criminalsanctions were introduced to show thewillingness of the state to enforce thelaw but, unfortunately, no prosecutionhas been initiated.


5.1 Freedom of ContractParties are free to contract on whateverterms they may choose. There arehowever restrictions on the successiveuse of fixed term contracts.

5.2 FormIn order to have legal effect contractsmust be in writing. The contract mustinclude amongst other things details ofcommencement date, duration (if it is fora fixed term), the wage payable, place ofwork, and holiday entitlement.

5.3 Trial PeriodsIt is common to include an initial trialperiod in a contract and the typicalduration is six months.


A contract may contain terms preventingcompetition and/or the disclosure ofconfidential information after thetermination of employment but suchterms are not commonly used. Suchclauses will only be upheld if they areconsidered reasonable.

5.5 Intellectual PropertyIntellectual property created during thecourse of employment belongs to theemployer without compensation beingpayable to the employee.

6. Pay and Benefits6.1 Basic PayThe government has the power to fixminimum wages by ministerial Orders.Thus far, the Orders issued cover theminimum wages of office clerks andshop assistants, which presently areCY£320 per month on engagementrising to CY£340 after six months’employment.

Obligations to increase wages exist if aparty to the contract is a trade union ora member of a trade union is a party tothe contract and wages will be reviewedat intervals in accordance with theprovision of applicable collectiveagreements.

Wages are subject to increase twice ayear by means of the review of theautomatic cost-of-living adjustment.

6.2 Private PensionsPrivate pension arrangements areprovided by employers.

Workers who reach the pensionable ageof 65 are entitled to a pension from theSocial Insurance Fund based on theircontributions, regardless of whether theystop or carry on working. In certaincircumstances, the pension can betaken at the age of 63. Many enterprisesprovide additional retirement benefitseither by making a lump sum paymentor by paying a pension of their own. Thepension scheme used may be based oncontributions from both the employerand the employee, or from the employeronly.

6.3 Incentive SchemesShare schemes arrangements areadministered by employers in Cyprus.

6.4 Fringe BenefitsFringe benefits such as cars, houses,phones, etc are made available byemployers to employees in managerialpositions.



30


6.5 DeductionsEmployers are obliged to deduct incometax and social security contributionsfrom employees’ salaries.

7. Social Security7.1 CoverageIn October 1980, a new social Insurancescheme (the Scheme) was put intooperation. With some minor exceptions,the Scheme covers all employed andself-employed persons in the island.Non-employed persons may, undercertain conditions, join the Scheme on avoluntary basis. The Scheme providesbenefits by way of maternity allowance;sickness benefit; unemployment benefit;old-age pension, invalidity pension,widow’s pension; orphan’s benefit;missing person’s allowance; marriagegrant; maternity grant; funeral grant; andbenefits for employment accidents andoccupational diseases, i.e. injury benefit,disablement benefit, and death benefit.

7.2 ContributionsThe contribution to the Scheme in thecase of employees is 16.6 per cent oftheir earnings up to a maximum ofCY£479 per week or CY£2,076 permonth (for 2006). Of the 16.6 per cent,6.3 per cent is paid by the employeehimself, 6.3 per cent by the employer,and four per cent from the generalrevenues of the Republic. Thecontribution in respect of self-employedpersons is 15.6 per cent of their income,11.6 per cent paid by themselves, andfour per cent from the general revenueof the Republic. In respect of voluntarycontributors, the contribution is 13.5 percent of their insurable income, 10 percent paid by the voluntary contributor,and 3.5 per cent from the generalrevenues of the Republic.

For the purpose of assessingemployees’ contributions, grossearnings from work are taken intoconsideration. In the case of the self-employed, however, the law prescribesnotional incomes which vary accordingto the occupational category. If,however, the self-employed personproves that his income is lower than theamount of the notional incomeprescribed, his contribution is assessedon that income.

8. Hours of WorkMost offices observe a 40-hour weekfrom Monday to Friday. Office hours arefrom 8 am to 5:30 pm, with a 90-minutelunch break during the winter, and 8 amto 7 pm, with a three-hour break duringthe summer. Government officesoperate from 7:30 am to 2:30 pm fromMonday to Friday. They also are openon Thursday afternoons from 3 pm to6 pm. There is a maximum workingweek of 48 hours including overtime.

The working time of young people andchildren is regulated by legislation.Persons of 15 to 18 years of age are notallowed to work more than 38 hours aweek and must not work between 23.00and 7.00.

9. Holidays and Time Off9.1 HolidaysUnder the Annual holidays with PaymentLaw, the provision of annual holidays forall persons employed under a contractof service is mandatory. Presently, theminimum period of annual leaveprovided under the legislation is fourweeks, 20 working days for employeesworking a five-day week, and24 working days for employees workinga six-day week. Payments in lieu ofany unused entitlement may be madeor alternatively can be carried forwardfor a maximum of two years (employerscontribute to the Central Holiday Fund atthe rate of six per cent of theiremployees’ wages up to a wages ceilingof CY£1.577 per month). To be entitledto an annual holiday payment from theFund, employees must have worked atleast 13 weeks during the previous leaveyear.

Employers whose arrangementsregarding holidays with pay are morefavourable than the provisions of theLaw may be exempted from contributingto the Fund. In such cases, annual leaveis granted directly by the employers totheir employees. Where an employedperson is, by virtue of any Law,collective agreement, custom orotherwise, entitled to a longer period ofholiday than three weeks, this right isguarantee by the Annual Holidays withPay legislation.

With respect to public holidays, thereare no statutory provisions to indicatewhich days in the year are publicholidays, except for Sunday. The publicholidays given in the private sector aregoverned by collective agreementsbetween employers and trade unions,and they usually follow the publicholidays given in the public sector. Incases where the employer is not boundby a collective agreement, it is at hisdiscretion to offer any of the publicholidays given in the public sector.

9.2 Family LeavePregnant workers have the right to16 weeks’ paid maternity leave. Nine ofthe 16 weeks must be taken during theperiod beginning at the second weekbefore the week in which birth isexpected. The 16 weeks’ period may, incertain circumstances, be extended incases where there is a delay in deliveryof the child. Women who undertake thecare of a child under five years old foradoption are entitled to 14 weeks’maternity leave. Maternity pay is paid bythe Department of Social Security at arate of 75 per cent of the employee’saverage salary of the preceding year.

Female employees also have the right toone hour off (paid) per working day for aperiod of six months after delivery forchild care and breast-feeding. There isno right to paternity or parental leave.Every employed parent (father andmother) who has worked for oneemployer for at least six months isentitled to parental leave totalling13 weeks subsequent to a birth oradoption, in order to attend to the careand upbringing of the child. This leave isunpaid but during it the employee iscredited with insurable earnings.Parental leave can be taken between theend of maternity leave and the child’ssixth birthday for a minimum of oneweek and a maximum of four weeks inany year. Parents are also entitled to upto seven days’ unpaid leave a year forurgent family reasons.

9.3 IllnessIf an employee’s doctor recommendsleave on ill-health grounds then theemployer may require the employee tobe seen by its doctor if it is not willing togrant leave. In cases where leave of


31

absence on ill-health grounds is granted,70 per cent of an employees wage ispaid by the Ministry of Labour and30 per cent by the employer. The periodover which payment will continue to bemade will depend on the length of theemployee’s employment and the reasonwhy leave is granted.

10. Health and Safety10.1 AccidentsThe workers’ right to safe and healthyworking conditions is safeguarded byappropriate legislation. The corelegislation is the Safety and Health atWork Law, which is in line with theprovisions of ILO Convention 155 of1981 on Occupational Safety andHealth, as well as with the principles andmost of the provisions of EU FrameworkDirective.

The Law covers all branches ofeconomic activity and imposes duties onemployers, self-employed persons, andemployees, as well as on designers,manufacturers, importers, and suppliersof articles and substances for use atwork. Enforcement of the legislation isimposed through inspections byqualified inspectors who make regularvisits to workplaces to ensure continuedcompliance.

Additional health and safety legislation isgradually being implemented; thefollowing have all recently come intoeffect: The Safety and Health at Work(Protection from Noise) Regulations of2006 (P.I. 317/2006), The Safety andHealth at Work (Protection fromAsbestos) Regulations of 2006(P.I. 316/2006) and The Asbestos(Safety and Health of Persons at Work)(Revoked) Law of 2006, Law111(I)/2006.

10.2 Health and Safety ConsultationThe Cypriot government promotes theactive involvement of both employersand workers in securing a safe andhealthy working environment byintroducing and implementing legislationon the establishment and operation ofSafety Committees in the place of work.With respect to health and safety thereis an obligation to consult withemployees. Employers are also requiredto obtain employer’s liability insurance.

11. Industrial Relations11.1 Trade UnionsThe business community of Cyprus isrepresented by the employers andIndustrialist Federation (OEB), aPancyprian independent organizationcomprising 40 professional associationsand 400 major individual enterprises inthe manufacturing, services,construction, and agricultural sectors ofthe economy. The OEB is theacknowledged spokesman for thebusiness community and is consulted assuch by the government.

The principle unions in Cyprus are thePancyprian Federation of Labour (PEO)and the Cyprus Workers’ Confederation(SEK), however there are numerousother trade unions and occupationalorganizations such as PASYDY, POED,OELMEK, OLTEK, ETYK, POAS, andDEOK. Conflict between trade unions inCyprus is rare and joint action amongthe leadership of the PEO and the SEKand the other occupational organizationsis common.

11.2 Collective AgreementsThere are collective agreementsbetween employers and trade unions inmany industry sectors and they are themain means by which term andconditions of employment aredetermined. Collective agreementsusually have a two or three yearduration.

11.3 Trade DisputesArticle 27 of the Constitution safeguardsthe right to strike of every employeesubject to some exceptions in relation tothe army and police.

The Trade Unions Law provides that noone can be sued for conspiracy if hewas acting with another in thefurtherance of a trade dispute. Inaddition inducement to breach acontract in the furtherance of a tradedispute is not actionable.

Strikes in Cyprus are generally rare asindustrial relations partners almostalways find a way to agree on all issuesrelating to employment. The settlementof labour disputes is governed by theprovisions of the Industrial RelationsCode.


Employers are under a duty to consultwith their employees, if their employeesbelong to a Trade Union.


12.1 GeneralThe provisions of the Acquired RightsDirective have been implemented inCyprus. If the employer changes due tothe legal transfer of a business, thecontractual and other rights andobligations arising from the employmentrelationship existing on the date of thetransfer, automatically transfer to thetransferee subject to a number ofexceptions in relation to pensions.The transferee is obliged to continue toobserve the agreed terms and conditionsof any applicable collective agreementuntil the date of termination or expiry.

If an employee is dismissed inconnection with a transfer other than forfinancial, technical or organisationalreasons, the dismissal is illegal and theemployee is entitled to damages whichare calculated according to length ofservice.


In the context of acquisitions andmergers there is an obligation to supplyinformation and/or consult or negotiatewith, employee representatives,employees, works councils and tradeunions.

The obligation to inform and consult istriggered when the vital interests ofemployees of the trade unions areaffected. The employees or workers’representatives must be informed of thedate, reasons for, and legal, financialand social implications of the transferand of any anticipated measures. Thisinformation must be provided in goodtime, and in any event before theemployees are directly affected by thetransfer.

A sale and purchase agreement cannotbe signed before the information andconsultation is completed, if the vitalinterests of trade union members will beaffected.



32


There is no statutory minimum periodover which the information/consultationprocess must take place; it is simply aquestion of fact and degree accordingto the circumstances of a given merger.

12.3 Notification of AuthoritiesThere is a governmental body whichregulates mergers and acquisitions. Thismust be consulted in the context of amerger of acquisition when the vitalinterests of trade union members aregoing to be affected.

The minimum period over which thisconsultation process can be completedwill depend on the facts of each case.

Failure to comply with these consultationobligations may lead to the imposition oflarge fines and possibly injunctions.

12.4 LiabilitiesFailure to comply with the employeeinformation and consultation obligationscan give rise to large fines andcompensation may also be payable tothe employees.

In addition the courts may also grant aninjunction until the information/consultation obligations are satisfied.

13. Termination13.1 Individual TerminationAn employer wishing to terminate theemployment relationship must be carefulto comply with the statutory reasons fordismissal.

13.2 NoticeExcept where summary dismissal isallowed, employers are required by lawto give a minimum notice period of:

■ 1 week’s notice for 6 months to1 year of service,

■ 2 weeks’ notice for 1 to 2 years ofservice,

■ 4 weeks’ notice for 3 years ofservice,



■ 7 weeks’ notice for 5 to 6 years ofservice, and

■ 8 weeks’ notice for more than 6years of service.

An employer may terminate summarily inthe circumstances listed in section 13.3below. In addition, an employee may besummarily dismissed in othercircumstances, e.g. where he/she haslied to the employer, has committed anact of gross misconduct or a criminaloffence.

Notice provisions apply to redundancycases as well. Employees are paidduring the notice period but theemployer can require the employee toaccept payment in lieu of notice. Anemployee who receives pay in lieu ofnotice and finds another job keeps thepay but, if he leaves for another jobwhile serving out his notice with the oldemployer, he loses the rest of the payfor the period of notice.

An employee who has beencontinuously employed for 26 weeks ormore is required to give to his employera minimum notice of one week.However, on notice from his employer,an employee who wishes to seek otheremployment may have time off of up tofive hours a week during working hourswithout loss of pay.

13.3 Reasons for DismissalThe basic rule is that a dismissal isunfair if the employer terminates theemployment for any reason other thanthe exceptions provided by statute.

Before any employee can qualify forunfair dismissal compensation, he mustbe less that 65 years of age and musthave been continuously employed bythe employer for not less that 26 weeks,unless there is a written agreement thatmay extend the qualifying period ofcontinuous employment up to104 weeks.

In cases where a dismissal is declaredunfair, compensation is payable to theemployee. The minimum amountpayable is two weeks’ pay up to amaximum of two years’ wages. Factorsto be considered in the award are

wages, length of service, loss of careerprospects, circumstances of thedismissal, and the employee’s age. Themaximum period of continuousemployment with one employer that canbe taken into account is 25 years(75.5 weeks’ compensation). Moreover,the amount of compensation is decidedby the Industrial Disputes Court afteran application by the employee.

Termination will be considered fair andwill not give rise to compensation in thefollowing circumstances:

■ The employee fails to carry out hiswork in a reasonably efficientmanner;

■ The employee is redundant;

■ The termination is due to an act ofGod or force majeure;

■ The contract is for a fixed term andhas expired;

■ The employee renders himself liableto dismissal without notice; or

■ The contract of the employee issuch that it is clear that the employer– employee relationship cannotreasonably be expected to continue.

13.4 Special ProtectionPregnant employees and maternityleavers may not be dismissed unlessguilty of a serious offence or conductwhich justifies termination.

Trade union officials are also protectedfrom dismissal without cause.

13.5 Closure and Collective DismissalsAs stated above, redundancy is a validreason for dismissal. Redundancy isdefined by statute.

Employees are entitled to receive astatutory redundancy payment if theyhave been employed for a period of sixmonths or more. Redundancy paymentsare not made by the employer but bythe Government Redundancy Fund intowhich employers pay monthlycontributions.

The Protection of Employees’ Rights inthe Event of Insolvency of the Employer


33

Law provides for employees to be paidwages and annual leave pay due fromtheir employer from a special fund if theemployer becomes insolvent.

There are prescribed information andconsultation procedures in the event ofcollective redundancies, i.e. where atleast 10 employees in an undertakingemploying between 21 and 100employees or 10 per cent of employeesin an undertaking of between 100 and300 employees are dismissed within30 days.

An employer who proposes to makecollective redundancies must consult therepresentatives of the employees in atimely manner with the aim of getting anagreement. The representatives must benotified in writing of the reasons for thedismissals, the criteria to be used, theperiod in which they will take place, thenumber and categories of employeeswho are to lose their jobs and themethod of calculating any paymentrelating to dismissals. In addition, writtennotice of the collective dismissals mustbe given to the Ministry of Labour andSocial Insurance and copy of this noticeprovided to the employeerepresentatives.

14. Data Protection14.1 Employment RecordsThe collection, storage and use ofinformation by employers is regulated bythe Data Protection Law whicheffectively implements the EU DataProtection Directive.

14.2 Employee Access to DataEmployees do have the right to requestaccess to their data that is being held bytheir employer.

14.3 MonitoringEmployers can monitor their employees’email, internet and telephone usage tothe extent that such usage is not workrelated if monitoring is reasonable in allthe circumstances.


The Data Protection Act does not permitemployers to provide their employees’data to third parties. However, if suchdata is required by state authorities as

regards the public interest and nationalsecurity then such provision is notcontrary to the law provided that theprinciple of proportionality is observed.



34

Employment and Benefits in the European UnionThe Czech Republic

The CzechRepublic1. IntroductionThe institutional framework for and thefunctioning of the labour market in theCzech Republic are regulated by theEmployment Act (N° 435/2004), whichcovers, for example, the prohibition ofdiscrimination in hiring employees, theoperation of the state-run Labour Offices(i.e. job centres) and private labouragencies, the qualification criteria forunemployment benefits, employment offoreigners and special provisions ofemployment relating to disabledpersons.

The principal source of law regulatingthe employment relationship is theLabour Code which covers all areas ofthe individual employment relationshipbetween an employer and an employee,including for example equal treatmentand prohibition of discrimination, accessto information, agency employment,working conditions, safety and health atwork, liability for damages anddismissal. In general, the Labour Codeallows for contractual freedom of partieswithin the limits set by the regulatoryframework; it is not therefore possible tocontract out of statutory employeeprotection.

Although the Labour Code containsbasic provisions concerning the freedomof employees to form trade unions,collective labour law rules (in particularthe collective bargaining procedure) arecontained in the Collective BargainingAct (N° 2/1991). Individual employeeentitlements arising from collectiveagreements are legally enforceable in thesame manner as other rights arisingfrom an individual employment contract.

The state carries out its supervisoryfunction through recently establishedWork Inspectorates that control andmonitor compliance with the obligationsarising from a great variety of labour lawregulations regarding, amongst otherthings, wages, salaries, hours of work,work safety, employment of minors andfemale workers.

Disputes between an employer andemployee are settled in ordinary Districtcourts where there are specialisedLabour Law senates of judges andlayman jurors.

2. Categories ofEmployee

2.1 GeneralCzech employment legislation appliesequally to employees at every leveli.e. employees, agency workers andcontract staff. The position of directorsof private and public limited companies,who may or may not also be employeesof the company, is further regulated bycorporate law. Special provisionsregulating the position of managers haveyet to be introduced in the CzechRepublic.

Part-time employees and employees onfixed term contracts have a statutoryright, which, broadly speaking, entitlesthose employees to be treated no lessfavourably in respect of their terms andconditions of employment than acomparable full-time indefinite employee.

The Labour Code stipulates that,outside a traditional employmentrelationship, an employer and a workercan conclude two other types ofagreement relating to work which are ofa similar nature to the employmentcontract: an agreement for theperformance of a work assignment, oran agreement on working activity.

An employer and a worker mayconclude an agreement for theperformance of a single workassignment if the expected duration ofthe assigned project is no longer than150 hours in a calendar year.

An employer and a worker can concludean agreement on working activityregarding work that does not exceed onaverage half of the prescribed weeklyworking hours (i.e. 20 hours per week).

3. Hiring3.1 RecruitmentEmployers recruit through a variety ofsources, including via the Internet andby advertising in newspapers and/orjournals. Recruitment agencies are alsocommonly used. State-run Labour

Offices function inter alia as “JobCentres” and provide a free recruitmentservice. Employers are obliged to notifythe Labour Office of all vacant positions(the Labour Office keeps a database ofall vacant positions and of all jobapplicants) and of when these vacancieshave been filled. Other than thisstatutory duty, there is, however, noobligation on employers to use theLabour Office.

3.2 Work PermitsEmployers may hire non-EEA nationalsonly if there are no EEA national jobapplicants who are available at therelevant time. In addition, the employeritself needs a permit, issued by theLabour Office, to enable it to hire aforeign work force. Work permits arerequired for employees who are non-EEA nationals, and may be granted forup to a maximum of one year with thepossibility of prolonging them after thisperiod. Swiss nationals are treated in thesame way as EEA nationals.The application must be made and theLabour Office must issue the workpermit before the employee arrives inthe Czech Republic (the work permit isalso a qualification for a residencepermit). It is an administrative offence foran employer to employ a non-EEAnational without an appropriate workpermit in the Czech Republic or toemploy such employees in contraventionof the terms of the issued work permit.In the event of breach, the Labour Officemay impose a fine of up to CZK2,000,000, (around EUR 71,000).

4. DiscriminationAny direct or indirect discriminationperpetrated in the workplace on certainselected grounds (primarily gender,sexual orientation, religion, maritalstatus, racial or ethnic origin, age, socialorigin or political association) is unlawful.Such discrimination in connection withrecruitment is prohibited by theEmployment Act and by the LabourCode in connection with treatmentduring the course of employment andwith respect to termination ofemployment. The Employment Act andthe Labour Code also guarantee equaltreatment to all employees. Theprovisions of the Labour Code onlycontain a general prohibition of


35

discrimination. It is anticipated that indue course specific non discriminationprovisions will be contained in the newAnti-Discrimination Act. However, untilthis piece of legislation is in place, theprotection against discrimination is notthat extensive.


5.1 Freedom of ContractThe basic principle that parties are freeto contract on whatever terms theychoose is modified by Czech LabourLaw which allows for contractualfreedom of parties only within the limitsset by the regulatory framework. Asstated above, it is not therefore possibleto contract out of statutory employeeprotection or the mandatory provisionsof the Labour Code.

Generally, employers are free to choosetheir employees. However, employmentof persons under the age of 15 yearsand/or of those persons who have notcompleted their compulsory education isprohibited except for various artistic,cultural, advertising and sports activitiesas specified in the Employment Act.

Contracts may be for a fixed or anindefinite period of time (i.e. terminableby notice), as the parties think mostappropriate. For the purposes ofstatutory protection, there is littledistinction between the position ofemployees on fixed-term and indefinitecontracts, as employers will not be ableto treat employees on fixed-termcontracts less favourably than similarpermanent employees. However, theuse of successive fixed-term contracts isrestricted. A fixed term contractbetween the same parties may beconcluded (or extended) for a maximumperiod of two years. If, contrary to thelaw, an employee has been engagedunder one or several fixed termcontracts, for a period of two years ormore (this applies to fixed-termcontracts concluded between the sameparties, if the new employmentcommences within six months after thetermination of the former employment),the employee may make a writtenrequest to the employer that theemployment continue for an indefiniteperiod, unless the employer has an

objective reason for the use of revolvingfixed-term contracts, i.e. when:

(a) the use of a fixed-term contract isrequired by specific legislation(e.g. the Act on Pension Insurancewith respect to working old-agepensioners);

(b) the employee is employed on thebasis of a fixed-term contract as areplacement for another employeewho is temporarily absent due toreasons listed in the Labour Code(service in the public interest,maternity leave, military service,education/training, sickness and/orimportant private reasons); or

(c) the employee is employed on thebasis of a fixed-term contract due tomajor operational reasons on thepart of the employer or due to thespecial nature of the work to beconducted by the employee (e.g.seasonal jobs in agriculture; suchreasons must be agreed in advancewith trade unions or stated in aninternal regulation of the employerissued if there are no trade unionsrecognised by the employer).

Either the employer or the employeemay seek a court decision regarding thefulfilment of the above statutoryconditions for a fixed-term contractwithin two months of the terminationdate of the original fixed-term contract.

5.2 FormAn employer is obliged to conclude anemployment contract in writing.However, failure to reduce the contractto writing does not invalidate theemployment.

An employment contract must specifythe type of work, the place of work andthe date of commencement of theemployment. If an employment contractdoes not specifically stipulate particularsof the employee’s rights and dutiesarising out of the employment (e.g. theholiday entitlement, the length oftermination period, the level of wagesand the mode of payment, the scheduleof weekly working hours etc.) anemployer is obliged to provide theemployee with a single separate

document containing such details withina month of commencement of theemployment.

5.3 Trial PeriodsAn employer and employee may agreeon a trial (probationary) period of up tothree months. The agreement must bein writing before the commencement ofthe employment (or at the latest on thesame day) and once agreed upon, thetrial period cannot be subsequentlyextended. During the trial period, theemployment can be terminatedimmediately by either the employer orthe employee for any reason or withoutstating the reason.


Although there are generally noapplicable statutory rules governingconfidential information in employment,there are particular statutory rulesgoverning treatment of confidentialinformation which apply to specifiedcategories of employees. In general,employees of State administrativeauthorities and local authorities areobliged to keep confidential all facts andinformation which they learn whilstcarrying out their duties and which, inthe employer’s interest, should not becommunicated to another person.An employer may conclude an expressconfidentiality provision in the contract ofemployment. All other employees arebound by a general duty of good faithand a duty not to disclose theemployer’s confidential information.The extent of these general duties is notin all cases well defined and a prudentemployer may, depending on the natureof the business, consider including anexpress confidentiality provision in thecontract of employment.

An employer is obliged to issue allemployees whose employment hasterminated a confirmation of the formeremployment and a reference. Withoutthe employee’s consent, an employermay not communicate any otherinformation concerning the employee.

An employer and an employee mayconclude an agreement whereby theemployee may not, for a certain periodnot exceeding one year after the



36


termination of the employment, engagein the same activity as the currentemployer, or any other activity whichwould compete with the businessactivities of the current employer.The non-compete undertaking may onlybe assumed by the employee if suchan obligation is justifiably required fromthe employee given the nature of theknowledge and information theemployee will have gained during theemployment. The non-compete clausemay be included in the employmentcontract in a case where no trial periodwas agreed, otherwise it may be enteredinto separately after the expiry of the trialperiod. The employer must pay theformer employee compensation in theamount of at least his/her averageincome for the whole period of therestrictive undertaking. The agreementmay also include a penalty that theformer employee must pay to theemployer in the event that he breacheshis/her obligation not to compete.The employer may terminate thisagreement only during the course of theemployment. Provisions concerned withpreventing competition by a formeremployee are likely not to be enforcedby the courts if the courts consider thatit would be unjustified and in restraint oftrade having regard, amongst otherthings, to the position of the formeremployee and the nature of theinformation/knowledge acquired duringthe course of employment.

5.5 Intellectual PropertyBroadly speaking, unless theemployment contract stipulatesotherwise, if intellectual property iscreated by an employee during thecourse of employment, it will belong tothe employer. Additional compensationwill only be payable to the employee ifhis ordinary salary is in substantialdisproportion to the employer’s profitsderived from the intellectual propertycreated. However, this rule applies onlyto a limited extent in relation tocomputer programs, databases andcartographic works.

6. Pay and Benefits6.1 Basic PayA wage may not be lower than thenational minimum wage, which isdetermined by a Government Decree

and is currently CZK 8,000 per month orCZK 48.10 per hour.

Lower-grade workers in the CzechRepublic are generally paid a monthlywage, often determined by reference toan hourly rate, although in someindustries it is customary for workers tobe paid “piece-rates” according to theamount of work done. Overtime at apremium rate must be paid in respect ofadditional hours worked and workperformed on bank holidays and/orweekends. Senior employees(managers) are normally paid monthly inarrears.

It is not common for pay to be index-linked and, subject to the nationalminimum wage, there are no legalobligations on employers to increasewages.

6.2 Private PensionsIn the Czech Republic employees musttake part in the mandatory public socialsecurity system including a publicretirement and old-age pension scheme.However, anyone may choose to takepart in a private pension plan in additionto the mandatory scheme by enteringinto a contractual relationship with anyof the licensed private pension funds.The employee, however, receives statecontributions to his insurance premiums.

Although private pension plans may beagreed as employer-sponsoredoccupational pension schemes, they areabsolutely independent of the particularemployment of the person taking part insuch pension plans. Therefore, anemployer bears no responsibilitytowards its employee or her/hiscontractual private pension funds,except for paying the agreedcontributions. The employer’scontributions are classified as tax-deductible costs.

6.3 Incentive SchemesShare schemes are not specificallyprovided for under Czech law and areimplemented mostly in foreign ownedcompanies as a part of their globalincentive schemes.

6.4 Fringe BenefitsMore senior employees’ employment

contracts may include fringe benefits;typically free use of a mobile telephone,a computer and a car for the duration ofthe employment. As benefits are usuallycontractual, the agreement shouldresolve the mode and timing of return ifthe employer proposes to withdraw thebenefit.

6.5 DeductionsAlthough generally employers areprohibited from making deductions frompay, they are obliged to deduct incometax and employees’ social securitycontributions (which are paid monthly bythe employer both for itself and onbehalf of the employee). They are alsoobliged to deduct employees’contributions to the mandatory healthinsurance system. Otherwise, theemployer may be obliged to makedeductions pursuant to a valid courtresolution on deductions fromemployees’ salaries. The list of thesedeductions and their order is given inthe Czech Code of Civil ProceedingsRules.

7. Social Security7.1 CoverageThe single state-administered socialsecurity system provides benefits byway of pensions, unemploymentbenefits, family-based benefits andsupport for individuals with a lowincome. Employers should be aware ofthe administrative burden (i.e.paperwork) connected with thecontributions to some of these statebenefits (for example, statutory sickpay). The contributions for these benefitsare included in the social securitycontributions of the employer and theemployee (see below in point 7.2).The employer, therefore, does not haveto pay these benefits as they areprovided by the respective state authority.

Mandatory health insurance is providedby specially licensed health insurers, themajor one being the state owned VZP(Vs̆obecná zdravotní pojis̆t’ovna). It isthe employer’s obligation to deduct anemployee’s compulsory contributionfrom his/her gross salary and send it tothe health insurer of that employee’schoice. However, anyone may choose totake part in a private health insuranceplan in addition to the mandatory


37

scheme by entering into a contractualrelationship with any of the licensedhealth insurers and pay additionalcontributions for extra services.

7.2 ContributionsEmployers must deduct from theiremployees’ gross salaries social securityand health insurance contributionspayable by employees and make anemployer’s contributions in respect ofeach employee. Employers andemployees must contribute the followingpercentages of the employee’s incometo social security and health insurance:

Type of Paid by Paid byInsurance Employer Employee Total

(%) (%) (%)

Social 26.0 8.0 34.0Security

Health 9.0 4.5 13.5Insurance

Total 35.0 12.5 47.5

8. Hours of WorkHours of work must not exceed 40hours per week (30 hours per week andsix hours a day for employees under theage of 18). Specific limitations areimposed by the Labour Code on thehours worked each day and each weekby persons working underground inmining professions and persons in thethree-shift and non-stop working regime,whose working hours must not exceed37.5 hours per week, and in the two-shift working regime, whose workinghours must not exceed 38.75 hours perweek. Further reduction of hours of workwithout an attendant reduction in wagesmay be provided for in a collectiveagreement and/or an internal instruction.

The employer decides on the schedulingof weekly hours of work and startingtimes for work after discussion with thetrade union. Hours of work are generallyscheduled into a five-day working week;however, flexible working hours may beintroduced after discussions with thetrade union, if applicable.

An employee is entitled to a break (forfood and rest) of at least 30 minutes forevery six hours of continuous work (andfor every 4.5 hours of continuous workin the case of employees under the ageof 18). Breaks for food and rest are notcounted as part of the hours of work.

The employer is obliged to schedulehours of work so that employees willhave:

(a) an uninterrupted period of daily restof at least 12 consecutive hoursbetween the end of one shift and thebeginning of the following shift withina 24 hour period; and

(b) an uninterrupted period of at least35 consecutive hours (or of at least48 hours for employees under theage of 18) in any seven day period.

The Labour Code contains exceptionswhere the uninterrupted period of restmay be reduced below the hours set outabove.

Generally, overtime work prescribed bythe employer must not exceed eighthours per week and 150 hours percalendar year. Overtime work exceedingthese limits may be performed onlyexceptionally and with the employee’sconsent. However, the average numberof overtime working hours must not beon average more than eight hours perweek during a reference period of26 weeks or 52 weeks if agreed in acollective agreement.

Night workers (i.e. where daily hours ofwork are worked between 10 p.m. and6 a.m.) must not work in excess of eighthours in each period of 24 hours.

An employer is obliged to keep records,in respect of each employee, of hours ofwork, overtime work, standby duties foroperating emergencies and work atnight.

The Labour Code provides for severaltypes of flexible employmentarrangements:

(a) Uneven Spread of Working Hours

If the nature of work requires an unevenschedule in individual weeks, then theemployer may, after a discussion withthe Unions, decide on an uneven spreadof working hours throughout a period of26 weeks or 52 weeks, the latter only ifagreed in the collective agreement. Inthis period, the average weekly workinghours may not exceed the standard

weekly limit of working hours (i.e. 40)and the length of one shift may not bemore than 12 hours.

(b) Flexible Working Hours

Flexible hours may be agreed to meetthe interests of employees’ personalneeds, after discussion with the Unions,if applicable. An employee chooses thestart and/or the end of his working daywhile the employer can stipulate specifictimes of the day during which anemployee must perform his duties.The total length of an individual shiftmay not exceed 12 hours.

(c) Reduced Working Hours

This option requires an agreementbetween the employee and theemployer. The agreement can allow foran employee to work for fewer hourseach day or only on certain weekdays.

(d) Account of Working Hours

This is a specific type of arrangement foremployers who have fluctuating needsfor a work force (e.g. in relation tounstable sales) and therefore employeeshave an uneven spread of workinghours. The employer must keep anaccount of the working hours and anaccount of the salary for each employee,showing the weekly difference betweenthe standard working hours and hoursactually worked. There is a balancingperiod of 25 or 52 weeks (the latter onlyif approved in the collective agreement).This type of arrangement can only beintroduced under the auspices of acollective agreement or an internalregulation; subject always to theconsent of the individual employee towhom this arrangement is to be applied.

9. Holidays and Time Off9.1 HolidaysThere are 12 statutory public holidaysper annum in the Czech Republic.However, if they fall on a weekend theyare not replaced, so the number ofpublic holidays varies each year. Inaddition, all employees are entitled to aminimum of four weeks’ (five weeks atstate administrative bodies) paid annualholiday per year, which accrues on a prorata basis from the first day of



38


employment. Money may not be paid inlieu of untaken statutory holidayentitlement except on termination ofemployment and in exceptionalcircumstances when the holiday couldnot be taken for urgent operationalreasons of the employer.

The employer may determine the periodin which employees can take theirholiday in accordance with a schedule ofholidays and with the prior consent ofthe trade unions (if applicable), so thatthe employee will, as a rule, be able totake the holiday at once and before theend of the calendar year in which theentitlement has been generated. If anemployee is granted holiday in severalinstalments, at least one of theinstalments must be not less than twoweeks long, unless the employer andemployee have agreed otherwise.

If the employer does not specify to theemployee when the holiday should betaken (or does not approve therequested holiday) by 31 October of thecalendar year following the year in whichthe entitlement has been accrued, theholiday period commences, by virtue oflaw, on the first working day immediatelyfollowing 31 October. These provisionsonly apply in relation to the four weeksof statutory holiday not in respect of anyadditional contractual holiday.

9.2 Family LeaveThe Labour Code stipulates that awoman is entitled to 28 weeks’maternity leave (37 weeks if the mothergave birth to more than one child). Inaddition, if either the mother and/or thefather so requests, the employer is afterthe initial period of 28 (or 37) weeksobliged to grant her/him additionalparental leave until the child reaches theage of three years. For the initial periodof 28 or 37 weeks the employer isobliged to retain for the employee anidentical position (at the same place ofwork). However, during the additionalparental leave the employer is onlyobliged to retain a vacant position inaccordance with the employee’squalifications.

During maternity/parental leave anemployee is not entitled to his wagesbut receives a statutory maternity pay or

a parental allowance. The parentalallowance may be provided even afterthe termination of the additional parentalleave, but until the child reaches fouryears of age at a maximum. However,the employer is not obliged to retain thejob for the parent during the fourth year.

Adoptive parents are entitled to takepaid maternity leave for a period of22 weeks (31 weeks if the adoptiveparent has adopted more than one child)up until the child(ren) reaches the ageof one year and parental leave isavailable until the child reaches the ageof three years.

9.3 IllnessEmployees who are absent from workby reason of sickness or injury have aright to receive statutory sick pay fromthe Czech Social Security Authority.Changes to the social security andhealthcare systems are anticipated tocome into effect on 1 January 2008, sothe position may change.

In this respect, some employers agreeto pay employees an amount greaterthan statutory sick pay for a limitedperiod, the length of which will varydepending upon the custom of theindustry and the status of the employee.

10. Health and Safety10.1 AccidentsThe Labour Code lays down the generalprinciples to be followed by an employerin relation to health and safety.Employers are under a duty to haveregard for the health and safety of theiremployees while at work (but nottravelling to or from work), and areobliged by law to maintain insuranceagainst liability for injury and diseasearising out of employment. A failure tocomply with the provisions of the LabourCode may result in liability. An employeris obliged to investigate the cause of anyaccident, report any accident to theState Safety at Work Authority and keeprecords of all accidents in the workplace. In addition to the generalprinciples laid down by the LabourCode, there are numerous specific Actsand regulations governing certain typesof workplace and certain types of workactivity (e.g. Act on Protection of PublicHealth No. 20/1966 Coll., Act on

Accident Insurance No. 266/2006 Coll.etc.).

10.2 Health and Safety ConsultationEmployers in the Czech Republic areunder an obligation to consult with theiremployees on health and safety matters.Consultation must be carried outthrough: (i) a representative nominatedby a trade union; or (ii) an electedrepresentative responsible for safety andprotection of health at work; or(iii) directly with employees, if neither ofthe elected bodies at (i) or (ii) exists.Specified information must be madeavailable by the employer.A representative responsible for safetyand protection of health at work may beelected, but such election is optional.Should a representative be elected, theemployer must then inform and consultthis representative in matters relating tosafety and protection of health at work.The employer can, if it so wishes, haveboth a representative responsible forsafety and protection of health at workand a works council. Depending on theemployees’ resolution to establish suchrepresentative bodies, the employer mayhave an obligation to consult in relationto health and safety issues with arepresentative responsible for safety andprotection of health at work and toconsult with the works council in relationto other matters.

Where there is neither a trade union,works council nor representativeresponsible for safety and protection ofhealth at work, the employer is obligedto inform and consult with theemployees directly.

11. Industrial Relations11.1 Trade UnionsThe Collective Bargaining Act is alegislative scheme providing forrecognition of a trade union by anemployer. In principal, an employer mustrecognise any trade union legallyestablished in the business. In order toestablish a trade union, three employeesof the relevant workforce suffice (there isno requirement for the workforce to beof a specific size). If a union isestablished, it becomes an authorisedrepresentative of the employer’semployees. Once established, the unionmust try and conclude an agreement


39

with the employer regulating theirrelationship and determining the matterswhich should be the subject ofnegotiation. In the absence ofagreement, a procedure based on astandard model will be imposed.

Where there is no trade union,employees can elect a works counciland/or a representative responsible forsafety and protection of health at work.

In the absence of a trade union, a workscouncil may be elected. If a trade unionis subsequently established, the workscouncil ceases to exist once thecollective agreement is concluded.

11.2 Collective AgreementsCollective agreements betweenemployers and trade unions are mostusually found in the industrial sector orin the health services and often regulatematters such as pay, working hours,holidays, dispute procedures andprocedures to deal with redundancy.Such collective agreements may havedirect legal consequences for theemployer, since certain terms in suchagreements may become incorporated(either expressly or by implication) intoindividual employee’s contracts ofemployment and where this happenssuch terms become directly enforceablein court (for example collectively agreedwage rates). Furthermore, in someindustries unionisation remainssufficiently strong for industrial pressureto prove an effective means of securingobservance of otherwise legallyunenforceable provisions contained incollective agreements. Basically,collective agreements can be negotiatedon two levels; either as house collectiveagreements (binding on a singleemployer and the trade union operatingwith that employer), or as sectoralcollective agreements (binding on allemployers and trade unions operatingwith those employers in a wholeeconomic sector).

11.3 Trade DisputesIn general, trade disputes usually concern:the conclusion of a collective agreementand the fulfilment of obligations arisingfrom a collective agreement (except thoseobligations relating to the claims of anindividual employee).

Contracting parties may agree toappoint a mediator to act in thesettlement of their dispute. If the partiesfail to agree on the mediator, he/sheshall be appointed by the Ministry ofLabour and Social Affairs, acting on thebasis of an application made by either ofthe contracting parties.

If the proceedings before the mediatorare unsuccessful, the contractingparties, if they so agree, may apply inwriting to an arbitrator to decide theirdispute. The proceedings before thearbitrator commence on his/her receiptof such application.

The Czech Republic does not have acomprehensive “strike/lockout law”.Rather, businesses, individuals andunions are granted certain limitedstatutory protection from liability, whichthey would otherwise incur, when takingindustrial action pursuant to a tradedispute. The Collective Bargaining Actdeals with employees’ rights to strikeonly with the aim of concluding acollective agreement, provided that thecollective bargaining procedure andsubsequent mediation and/or arbitrationprocesses have been exhausted withoutsuccess. It follows that if a collectiveagreement is not concluded even afterproceedings before a mediator and/orarbitrator, or the contracting parties donot apply for an arbitrator’s awardregarding their dispute, a strike (partialor full interruption of work by employees)or lock-out (partial or total cessation ofwork by the employer) may be used asthe last resort, unless the industrialaction is declared illegal by the court atthe request of the other party. Anemployee who takes industrial actionloses the right to pay during that periodand is not entitled to receiveunemployment benefits and/or sick pay.It is unfair to dismiss an employee whois taking “protected” industrial action.


Employers have obligations with respectto consultation and the provision ofinformation to employees either directlyor to their appropriate representatives(these are usually either a trade union ora works council). There are somedifferences as to the scope of the

employer’s obligation with respect toconsultation and the provision ofinformation vis-à-vis a trade union and aworks council. In general, a trade unionhas a privileged position and must beinformed and/or consulted in all matterslike a works council, and also in mattersrelated to health and safety at work,which would otherwise be discussedwith a representative responsible forsafety and protection of health at work,if elected (see above).

An employer’s obligations with respectto the provision of information to a tradeunion include:

(a) wages, salaries, an average wageand its individual elements (includinginformation about the average wageof the various occupationalcategories within the employer);

(b) the employer’s economic andfinancial situation, impact of theemployer’s activity on theenvironment and ecologicalmeasures taken by the employer;

(c) the employer’s legal status andchanges in such status, its internalorganisational structure, the personauthorised to act on behalf and inthe name of the employer in labourrelations and any current and futurechanges in the employer’s businessplans and activities;

(d) the fundamental issues concerningworking conditions and their safetyand the protection of health at work;

(e) measures taken to secure equaltreatment of employees and theprevention of discrimination;

(f) lists of vacant indefinite periodpositions available with the employerwhich would be suitable foremployees working for a fixed term;and

(g) matters where the employer hasconsultation obligations.

An employer’s obligations with respectto the consultation of a trade unioninclude:



40


(a) the employer’s economic situation;

(b) work output norms;

(c) changes in work organisation;

(d) the system of appraisal andremuneration of employees;

(e) the system of employee training andvocational training;

(f) measures designed to facilitateemployment of disadvantagedindividuals, especially adolescents,person taking care of a child under15 years of age and disabledpersons, including substantial issuesrelating to the care for employees,measures aimed at improvinghygiene at work and the workingenvironment, and organisation ofsocial, cultural and physical trainingservices; and

(g) other measures which relate to alarge number of employees andmatters where the employer hasconsultation obligations.

An employer’s obligations with respectto the participation of a trade unioninclude safety and working conditionsand contributions to the employees’social fund.

The European Works Council Directivehas been implemented in the CzechRepublic, and while the initialestablishment of the employeenegotiating body is quite clearlyregulated, subsequent negotiations aregenerally up to the parties to regulate.


12.1 GeneralUpon the transfer of an undertaking,employees are provided with protectionin that their entire contract automaticallytransfers from the transferor to thetransferee. Employees have no right toobject to this automatic transfer and itslegal consequence (and may not insiston for example, the continuation ofemployment with the transferor).Dismissals based solely on the transfer,or changes to existing terms andconditions of employment (i.e. contract

of employment or collectiveagreements), by reason of the transferare void, even if agreed to byemployees.

Termination of employment is possible inthe context of envisaged restructuring,as there are no specific rules prohibitingdismissal of employees prior to, during,or after the transfer (however it is notadvisable to dismiss employees duringthe transfer of the undertaking becauseof a higher risk of the dismissals beingchallenged). The transfer of businessitself, however, can never serve as areason for dismissal and all of thegeneral rules mentioned below, whichare applicable to termination ofemployment, must be complied with,i.e. termination of employment must bebased on the grounds explicitlydetermined in the Labour Code.


Regardless of the numbers of employeesinvolved employers have information andconsultation obligations to a trade unionor a works council, (if established), or toemployees directly where there is noform of established employeerepresentation in the company.The transferor and the transferee areobliged to inform the employees ofand to discuss the following:

(i) the fact that the relevant transfer isto take place; when it is to takeplace (approximately) and thereasons for it;

(ii) the legal, economic and socialimplications of the transfer for theaffected employees; and

(iii) the measures (if any) which thetransferor and the transfereeenvisage in connection with thetransfer and in relation to theemployees affected by the transfer.

There are no statutory rules prescribinga minimum period of time for theinformation/consultation of employees’representatives before completion of thetransaction. However, the consultationand provision of information shouldhappen “before” the transfer andtherefore the transfer agreement should

be signed only after the information andconsultation process has beencompleted. In this respect, theinformation and consultation processdoes not have to lead to a mutualagreement between the parties. Theabsence of any such agreement cannotaffect the validity of the transfer.

12.3 Notification of AuthoritiesThere is no obligation on an employer tosupply information and/or consult ornegotiate with any governmental orregulatory body.

12.4 LiabilitiesIn the event of a failure to comply withthe consultation and informationobligations, the Work Inspectorate mayimpose a fine of up to CZK 200,000(approx. EUR 7,000), however, thevalidity of the transfer cannot beaffected. No compensation is payable toemployees. It is not, however, possibleto obtain an injunction or other judicialremedies.

13. Termination13.1 Individual TerminationAn employer wishing to terminate theemployment relationship must be carefulto ensure compliance with both thestatutory and any contractualrequirements with regard to reasons forand procedures leading to dismissal.

An employment relationship may only beterminated by one of the following:

(a) an agreement between the employerand the employee;

(b) a notice of termination (given by theemployer or by the employee);

(c) an immediate cancellation (effectedby the employer or by theemployee); or

(d) a cancellation during the trial period(by the employer or by theemployee).

Although Czech Labour law does notrecognize certain categories of managerialemployment contracts it is possible, andcommon, to have special arrangementswith respect to the termination ofemployees in managerial positions.


41

If agreed in the employment contract theemployer may remove the manager fromthe position at any time and for anyreason or without stating a reason. Themanager’s current position terminatesthe day following receipt of writtennotice of termination, unless theemployer agrees with her/him on a latertermination date. The manager mayresign from the position at any time. Insuch event the manager’s currentposition terminates the day following thedelivery of her/his written notice ofresignation to the employer, unless themanager agrees with the employer on alater termination date.

The Labour Code provides, however,that the employment relationshipbetween the manager and the employerdoes not terminate upon the manager’sremoval/resignation from the position.As soon as the manager is removedfrom the position or resigns, theemployer agrees with the manager onher/his reassignment to another positionwithin the employer’s company. Theemployment with the employer will beterminated only if the employer is unableto offer the manager another suitableposition or the manager refuses theoffered position; such a situation wouldallow the manager’s employment to beterminated on the grounds ofredundancy.

13.2 NoticeTo be valid, any notice given by eitherthe employer or the employee must bein writing and delivered to thecounterparty. The delivery of the noticemust also comply with the proceduralrules set out in the Labour Code. Theminimum notice period is two months.A longer period can be agreed, however,it must always be the same for bothparties. The notice period begins to runon the first day of the month followingthe month in which the terminationnotice was given.

13.3 Reasons for DismissalAn employee may at any time serve anotice of termination upon his employerto terminate the employment for anyreason, or without stating a reason.An employer, on the other hand, mayserve a notice of termination on anemployee only for a good cause

expressly listed in Section 52 of theLabour Code, as follows:

(a) closure or relocation of the employeror its branch;

(b) the employee’s redundancy as aresult of the employer’s decision tochange the goals of the enterprise orto reduce the number of employeesin order to increase work efficiency;

(c) if a relevant medical expert considersthat the employee must cease toperform the current work due to awork-related injury or ill-health or therelevant public health authoritiesconsider that the employee hasattained the maximum permissiblelimits of exposure (e.g. to dangeroussubstances, underground work etc)in the workplace;

(d) if the employee has been certified asincapable of performing his work fora prolonged period as aconsequence of a medical condition;

(e) if the employee does not fulfil thelegal or regulatory prerequisites forthe performance of the work;

(f) if the employee fails to meet thestandards required by the employerand has failed to improve hisperformance within a stipulated timeframe after a written warning fromthe employer to do so;

(g) grounds for summary termination orif the employee has committedserious breaches of his/herobligations arising from the legalrules and regulations related to thework performed. In the event of acontinuous, less serious breach ofan obligation arising from the legalrules and regulations related to thework performed it is possible to givethe employee notice of termination, ifwithin the preceding six months theemployee was warned of thepossibility of dismissal in relation tosuch a breach.

The employer must prove that one of theabove reasons existed at the time of thedismissal and that it acted fairly andreasonably in deciding to dismiss the

employee. The employer must, therefore,be careful to ensure, not only that thereis a permissible statutory reason fordismissing the employee, but that a fairand reasonable procedure has beenfollowed in implementing the dismissal.

If the employer terminates theemployment for grounds (a) or (b)above, the employer has an obligationto pay the employee compensation(severance pay) of an amount equal tothe employee’s average salary for aperiod of three months. For thesepurposes the average salary iscalculated on the basis of totalremuneration paid to the employeeduring the previous calendar quarter.Severance pay where the reason fortermination is ground (c) above will be aminimum of twelve months’ salary. Suchcompensation must be paid by theemployer not only in the event of anotice served by the employer, but alsoin cases where the employer and theemployee have concluded an agreementon termination of employment forgrounds (a) or (b) above and the groundis expressly specified in the terminationagreement. The employee has a right torequire that the agreement ontermination specifies the reason for suchtermination.

If an employee is dismissed withoutgood cause and the employee insists onbeing further employed, the employmentcontinues to exist and the employee isentitled to a wage compensation,provided that the employee hassuccessfully filed an action at court. Theemployee may file an action for unjustdismissal within two months from thealleged unjust termination of theemployment. If the employee’s action issuccessful he may receivecompensation in the amount of hissalary and benefits which the employeewould have received if the employmenthad continued or during the noticeperiod which would have been triggeredby a lawful termination.

13.4 Special ProtectionSpecial rules apply to dismissalsconnected for example with pregnancyor maternity/family leave, the duties ofemployee representatives, asserting astatutory right, trade union membership



42


or activities, transfers of undertakingsand public interest activities. The LabourCode sets out in detail the situations inwhich the employer is not allowed toserve a termination notice on theemployee at all (pregnancy, maternityleave, sick leave etc). It also contains anumber of complex exceptions underwhich these restrictions do not apply.

13.5 Closures and Collective DismissalsRedundancy constitutes a goodstatutory reason for dismissal and,although it may be applicable toindividual termination (for example, if oneemployee’s specific job disappears), it iscommonly associated with the partial ortotal closure of a business.

A collective dismissal arises if a specifiednumber of employees are dismissed forspecified reasons within a specifiedperiod of time. The specified period is30 calendar days; the specified reasonsfor dismissal are closure or relocation ofthe employer or his branch andemployee’s redundancy; and thespecified number of dismissedemployees varies according to the sizeof the employer and is as follows:

(a) 10 employees if the employeremploys from 20 to 100 employees;

(b) 10 per cent of employees if theemployer employs from 101 to300 employees;

(c) 30 employees if the employeremploys more than 300 employees.

If an employer dismisses five employeesor more for the above reasons, anyadditional termination of employment byagreement for the same reasons and inthe same period will be deemedterminations pursuant to the collectivedismissals definition. This statutory ruleis to prevent employers fromcircumventing their statutory duties withrespect to the collective dismissalsituation by dismissing their employeeson the basis of “formal” terminationagreements instead of dismissal.

The employer must no later than30 days before serving the notices:

(a) Inform the trade union or the workscouncil (or the affected employees if

there are no employeerepresentatives) in writing of theintention to carry out a collectivedismissal.

(b) Inform the trade union or the workscouncil of:

(i) the reasons leading to thecollective dismissals;

(ii) the total number of employeesemployed by the employer andthe roles involved;

(iii) the number of those employeesto be dismissed and thestructure of roles of thoseemployers

(iv) the period within which collectivedismissals are planned to takeplace;

(v) the criteria proposed for selectingemployees to be maderedundant; and

(vi) the redundancy payment and, ifrelevant, other rights of theemployees being maderedundant.

(c) Discuss the intended action with thetrade union or the works council.During such discussions thefollowing issues should beaddressed:

(i) measures that could prevent orlimit the collective dismissal; and

(ii) measures that could mitigate theadverse consequences for thedismissed employees, inparticular the possibility of theirrelocation to other positionswithin the employer’s business.

(d) Provide the trade union or the workcouncil with information and data toallow them to be prepared for thediscussions. The content and theamount of such information is notspecified by the Labour Code andwill depend on the actual situationand on the reasons leading to theproposed collective dismissals.

(e) Notify the Labour Office of theintended dismissals in writing, and ina notice containing the followinginformation:

(i) the reasons leading to thecollective dismissals;

(ii) the total number of employees tobe dismissed;

(iii) the number and list ofoccupations of those employeesto be dismissed;

(iv) the period of time during whichthe collective dismissals will takeplace;

(v) the criteria for selection of theemployees to be dismissed; and

(vi) the date of commencement ofdiscussions with the trade unionor the works council.

The employer is obliged to deliver to theLabour Office a written notice containingits decision to carry out a collectivedismissal and inform the Labour Officeabout the results of negotiations with thetrade union and deliver a copy of thenotice to the trade union for itscomments. The employment will not enduntil 30 days after the above notice isdelivered to the Labour Office, unlessthe dismissed employee does not insiston this extension of the notice period.In this respect, the fact that the employerand the trade union do not reach aconsensual agreement during theirdiscussions does not have an impact onthe validity of the termination notices.

14. Data Protection14.1 Employment RecordsThe collection, storage and use ofinformation held by employers abouttheir employees and workers(prospective, current and past) areregulated by the Data Protection Act(as amended), which implements theEU Data Protection Directive.

Essentially employers, as datacontrollers, are under an obligation toensure that they process personal dataabout their employees (whether held onmanual files or on computer) in


43

accordance with specified principlesincluding the following: a requirement toensure that data is accurate, up to date,and is not kept longer than is necessary,a prohibition of pooling of personal datacollected for different purposes and arequirement that information is storedsecurely to avoid unlawful access oraccidental destruction or damage to it.

Under the Data Protection Act,disclosure of personal data isconsidered a form of data processing,and is therefore subject to the generalprinciples under the Act. Data controllersmust protect personal data and theentire database system againstaccidental or illegal access, destructionof data, changes to or loss of data,illegal disclosure or processing of data,and other forms of misuse of data.Employers are obliged to ensure andevidence that they have a documentretention policy in place (includingtechnical and organisational measures)and to ensure that staff are aware oftheir data protection obligations.Employers must also define conditionsunder which, and the extent to which,personal data will be processed byemployees or by other persons under anagreement with the employer. In general,employees and other individuals whoprocess data under an agreement withthe employer or who come into contactwith personal data when exercising astatutory right or duty are under a dutyof confidentiality and are prohibited fromdisclosing the personal data to thirdparties.

14.2 Employee Access to DataEmployees, as data subjects, have theright to make a subject access request.The employer as a data controller must,without undue delay, provide to anyindividuals who request it informationconcerning the processing of theirpersonal data. The information that mustbe provided includes the personal dataor categories of personal dataprocessed, the purpose of theprocessing, the source of the data andthe recipients or categories of recipientsof the data. The data controller ispermitted to require a reasonable fee forthe provision of this information,however this should not exceed thenecessary costs incurred in providing it.

14.3 MonitoringThere are no specific rules under CzechEmployment Law, nor any other specificlegislation, relating to the monitoring ofemployee email, Internet use, ortelephone calls. However, it is notautomatically lawful. Under article 13 ofthe Human Rights Charter of the CzechConstitution, citizens’ rights toconfidentiality of messages sent by postor other means of communication isguaranteed and under the Czech PenalCode, it is a criminal offence to breachthe confidentiality of privatecommunications. Pursuant to theopinion of the Czech Office for theProtection of Personal Data, it seemsthat an employer would only be able tomonitor an employee’s email, Internetuse, or telephone calls if either theemployment contract or the employer’sinternal rules stipulated that thesefacilities be used by the employee solelyfor work purposes, and that theemployer will have access to allemployee communications which arenot marked as personal or confidential.


An employer who wishes to provideemployee data to third parties must doso in accordance with the DataProtection Act principles and processingconditions. In many cases it may benecessary to obtain the express consentof the employees concerned to suchdisclosure in the absence of a statutoryor legitimate business purpose for thedisclosure and depending on the natureof the information in question and thelocation of the third party. Transfers ofpersonal data from the Czech Republicto other EU Member States are notrestricted. However, where the thirdparty is based outside of the EU itshould be noted that the DataProtection Act prohibits the transfer ofdata to a country outside of the EUunless that country ensures an adequatelevel of protection for personal data (byadducing adequate safeguards for theprotection of the transferred personaldata) or if one of a series of limitedexceptions apply. These exceptionsinclude, for example, transfers made inaccordance with international treatiesbinding on the Czech Republic or inaccordance with a relevant resolution of

the European Union Commission,transfers made with the employee’sconsent and transfers necessary for thepurposes of a significant public interest.Even if one of these exceptions arises,authorisation by the Office for theProtection of Personal Data is requiredfor international data transfers other thanto other EU Member States.



44

Employment and Benefits in the European UnionDenmark

Denmark1. IntroductionThe Constitution, legislation, collectiveagreements, individual contracts ofemployment and customary practicesare the main sources of employment lawin Denmark.

Collective agreements are by far the mostimportant source of labour law. There isa strong tradition whereby the rulesregulating employment contracts areformulated in the first instance by theparties to collective agreements.These agreements are then interpretedby labour Courts and arbitration boardswhich formulate customary practice rules.Most collective agreements regulateworking conditions and industrial relations.

Individual labour law is made up ofgeneral rules of contract law andprovisions of legislation which protectemployees. Legislation on this subjectcan be divided into two categories: thefirst category includes laws whichregulate particular types of employeeslike salaried employees, apprentices,agricultural workers, civil servants etc.The second category of laws regulatecertain employee rights like holidays,leave of absence, wage protection incase of insolvency etc without targetingspecific classes of employees.

Labour disputes are resolved throughthe ordinary Courts on the one handand labour Courts and arbitrationboards established by trade unionorganisations on the other hand.Ordinary Courts have jurisdiction overthe interpretation of legislation andindividual contracts, while labour Courtsand arbitration boards deal with casesrelating to individual and collectivelabour rights derived from collectiveagreements as well as certain disputesover legislation which give jurisdiction tothe labour Courts.


2.1 GeneralEmployees can be divided into twobroad categories: salaried employeesand workers. Salaried employees(funktionaerer) are employees carrying

out mainly non-manual work. Theiremployment status is governed bylabour law and principally by the 1938Act – last amended in 2006 – onEmployers and Salaried Employees(Funktionaerloven). Workers carrying outprincipally manual work have noparticular legislation applying to themand their employment relationship ismainly governed by collectiveagreements and customary practice.

Unless specific reference is made to onecategory, the word “employee” is usedin this section to cover both types ofemployment.

2.2 DirectorsSenior employees or directors belong toa special category. Their workingconditions are governed exclusively byindividual contracts and no specific rulesapply to them.

3. Hiring3.1 RecruitmentEmployers are free to recruit as theywish provided they do so on a non-discriminatory basis.

3.2 Work PermitsNon-EU and non-Nordic employeescannot be employed without a workpermit and a residence permit. In orderto obtain a work permit, the proposedemployee must have specific skills thatno other Dane, EU national or Nordicperson can match.

With respect to employees from the newEastern European countries there is aspecial interim arrangement aimed atensuring a gradual transition to the freemovement on labour. Employees fromthese countries are eligible to receiveDanish work permits if they are offeredfulltime employment in Denmark withconditions corresponding to the relevantcollective bargaining agreements.

4. DiscriminationComprehensive legislation operates toprohibit discrimination on grounds ofsex, age, race, marital status, militarystatus, disability, sexual orientation,religion, political belief etc. Discriminationlegislation is allowed to protect certaincategories of people such as pregnantwomen or disabled persons.

According to the Law on Equal Wages(Lov om Ligeloen), men and womenmust receive equal pay for equal work.This right cannot be contracted out ofand it is for the employer todemonstrate that the pay system is notdiscriminatory.

The Act on Equal Treatment of Men andWomen (Lov om Ligebehanding) aims atpreventing discrimination in areas suchas hiring, firing, training, andemployment terms and conditions.Compensation for dismissal ondiscriminatory grounds is uncappednotwithstanding this compensation canbe the same as that for unfair dismissal(see below) unless the dismissedemployee is pregnant or on maternityleave in which case the compensationcan be considerably higher. The EqualityCouncil is the body charged withenforcing the legislation ondiscrimination, but disputes arising froman infringement of the Law will beresolved in the ordinary Courts.


5.1 Freedom of ContractFreedom of contract is a fundamentalfeature of Danish law. However, becauseof the detailed regulation provided bylegislation and collective agreements,contracts of employment for employeesare generally brief. An individual contractcannot provide terms less favourablethan those provided by legislation orcollective agreements.

5.2 FormLegislation relating to the form of theemployment contract and its contenthas been passed implementing witheffect from 1 July 1993 the EU Directivedealing with the information applicableto contracts of employment. In manycases contracts are modelled onstandard contracts agreed betweenemployers’ organisations and tradeunions. However, as the above-mentioned legislation requires theprincipal terms of employment to be setout in the employment contract, manyemployment contracts will also ofteninclude individual terms.

Contracts are assumed to be for anindefinite period unless specifically


45

stated to be otherwise. There arespecific regulations relating to fixed-termcontracts. If an employment relationshipcontinues after the expiry of a fixed-term, the contract is assumed to havebeen converted into a contract for anindefinite period.

5.3 Trial PeriodsAny probationary period must bespecified in writing and may not be morethan three months for salariedemployees. There is no general rule ontrial periods for workers; however, mostcollective agreements provide that acontract of employment can beterminated without notice in an initialperiod that can sometimes be as longas nine months.


The Marketing Practices Act(Markedsforingsloven) prohibitsemployees from disclosing businesssecrets during employment and for threeyears after its termination. Employerscan claim damages when theconfidentiality duty has been breachedand an injunction may be awarded by aCourt preventing violation of the law.

Post termination restrictions, such asfurther limitations on the exploitation ofknowledge gained during theemployment or the prohibiting ofsolicitation of a former employer’scustomers or clients, are fairly common.Non-competition and non-solicitationclauses can be imposed on salariedemployees and compensation equal to50 per cent of the employee’s salary isdue to the salaried employee during theterm of the non-competition and/or non-solicitation clause. Non-competitionclauses, however, can only be imposedon salaried employees holding a post ofresponsibility.

5.5 Intellectual PropertyAn employer is entitled to ownership ofany invention made by an employeeduring the course of employment,provided compensation is given to theemployee. The compensationrequirement does not apply when theemployee is engaged in research.

6. Pay and Benefits6.1 Basic PayThere is no statutory minimum wage,but collective agreements set aminimum wage for a large percentage ofthe Danish workforce. Those notcovered by these agreements areentitled to a reasonable wage or to acustomary wage fixed by reference tothe trade and industry in which theywork.

The automatic adjustment of pay ratesin line with the cost of living has beenabolished and accordingly there is norule requiring indexation of salaries.

6.2 Private PensionsOn top of the mandatory supplementarypension scheme for qualifyingemployees (the Labour MarketSupplementary Plan – ATP), there are anincreasing number of private pensionschemes. It is customary for bothsalaried employees and workers to becovered by a pension scheme with theschemes often providing retirement,survivors’ and disability benefits.Funding is obligatory and schemes arearranged in the form of individual orcollective accounts based on definedcontributions.

6.3 Incentive SchemesThere are favourable tax provisionswhich are aimed at promoting individualownership of shares. A distinction isdrawn between profit sharing schemes(where employees may receive sharesfrom their employer tax free up to acertain value) and stock option schemes(where employees are granted a right tosubscribe for shares from theiremploying company at a discount.)

Pursuant to the Danish Stock OptionAct (enacted 1 July 2004) where anemployer terminates an employee’semployment prior to the employee’sexercise of the share purchase orsubscription rights granted to him, theemployee is entitled to retain such rightspursuant to the exercise terms of thescheme or agreement as if theemployee had continued hisemployment. In addition, the employeeis also entitled to receive a share,proportionate to the length of hisemployment in the accounting year, of

the grants to which he would have beenentitled according to agreement orcustom, had he still been employed atthe end of the accounting year or at thedate of grant.

Where an employee terminates hisemployment before exercising the sharepurchase or subscription rights grantedto him, he will forfeit such rights, unlessotherwise provided in the terms of thescheme or agreement. Also, the right toreceive further grants after termination ofthe employment will be forfeited.

The Stock Option Act applies only togrants made after 1 July 2004.Employees who were granted stockoptions prior to 1 July 2004 are entitledto retain all rights to these, regardless ofwhether the termination of employmentwas voluntary, involuntary for cause ornot.

6.4 Fringe BenefitsIt is common for company cars andsupplementary pension benefits to beprovided for senior employees and astaff canteen with subsidised meals forall the workforce.

7. Social Security7.1 CoverageThe state social security systemprovides a comprehensive range ofbenefits: retirement pensions, survivors’pensions, medical care, sickness andmaternity benefits, disability benefits,family allowances and housingallowances.

On top of the basic flat rate pension, theATP covers all employees over the ageof 16 and provides a supplementarypension based on the contributionperiod.

Various unemployment insurance fundshave been set up under the control ofthe Minister of Labour. They cover alarge percentage of the workforce,mostly trade union members.Membership of these funds is notcompulsory and anyone who claimsbenefits from these funds must havebeen a member of these funds for aminimum period of one year inaggregate within the past three yearsand paid contributions equal to one



46


year’s contributions, must demonstratemembership of a fund during that timeand willingness to take newemployment. Benefits payable undersuch schemes are equal to a maximumof 90 per cent of monthly salary up to aceiling whilst employed. Both theemployee and the state contributetowards the funds.

In case of industrial injuries andoccupational diseases, benefits areprovided by insurance companies underthe supervision of the National SocialSecurity Office and funded byemployers’ contributions.

7.2 ContributionsContributions to the social securitysystem are levied through the taxsystem except in respect of ATP,education and industrial injury.

Both employers and employeescontribute to ATP. Employers’contributions equal DKK 1,951 (in 2007)per year per full-time employee and full-time employees contribute DKK 976 (in2007) annually. The employer’s premiumto the industrial injury scheme (AES)varies annually from approximately DKK3740 for salaried employees and up toDKK 10,500 for workers. The size of thepremium is dependent on the number ofemployees in the company and thesector in which the company operates.

Since 1 January 1994, a tax on grosswages at the rate of five per cent whichrose by one per cent each year to nineper cent in 1998 has been levied toprovide revenue for allowances paid tothe unemployed and for education,training and sickness (AM-bidrag).During 2007 the tax on gross wages iseight per cent.

Further, an employee must pay one percent in to the special pension fund(SP-bidrag) from the age of 17 untilretirement. Payment to the specialpension fund is suspended in 2007.

8. Hours of WorkThere is no general legislation on normalworking hours. However, the Danish Acton Implementation of the Working TimeDirective provides that the averageworking hours per week, including

overtime, may not exceed 48 hours.Furthermore, the Working EnvironmentLaw provides for most employees tohave an 11-hour break in any 24-hourperiod and at least one day off in everyseven day period.

Hours of work are usually regulated bycollective agreement or the individualcontract of employment. Most privatesector employees work 37 hours aweek. In the case of night work, themaximum average working hours maynot exceed eight hours during any 24-hour period. There is no ban on Sundaywork, but work on Sundays and publicholidays is regarded as overtime if thereis no other stipulation in the collectiveagreement.

Young people under the age of 18cannot work more than the agreedhours for the industrial sector subject toa maximum limit of eight hours a dayand 40 hours a week.

Most collective agreements containprovisions relating to overtime pay andCourts have interpreted them as givingemployers the right to requireemployees to work overtime. If there isno collective agreement, by customarypractice there is an obligation on theemployee to work overtime provided thisright is not misused by the employer.However, an employee may refuse towork overtime if the obligation to workovertime is not stipulated in theemployment contract or for personalreasons which must be communicatedto the employer. A collective refusal byemployees may be treated as a breachof contract.

9. Holidays and Time Off9.1 HolidaysThe Holiday Act (Ferieloven) provides astatutory right to 2.08 days’ paid holidayper calendar month or five weeks’holiday after one year’s work.

Salaried employees receive normalsalary during the vacation period,together with a holiday supplementequal to one per cent of annual salary.When a salaried employee leaves theemployer, the employer has to make apayment in lieu of holiday known as“holiday allowance” equal to 12.5 per

cent of the salary. Workers receiveholiday pay in place of their salary, whichequals 12.5 per cent of the previousyear’s salary.

An employee and employer may agreethat the employee take educationalleave for a period determined accordingto the type of education. During a periodof such educational leave, the employeemay be entitled to an allowance payableby the Government.

9.2 Family LeavePregnancy leave can be taken fourweeks before the expected date of birth.The mother has 14 weeks of maternityleave after the birth. In addition, thefather is entitled to two weeks’ leave tobe taken during the first 14 weeks afterthe birth. After the 14th week after birth,each parent is entitled to an additional32 weeks’ leave which may be taken bythe parents consecutively orconcurrently. This parental leave may beincreased by an additional 14 weeks.The employee is entitled to postponeeither the parental leave or the additionalparental leave by between eight and13 weeks.

During the pregnancy and maternityleave from four weeks before theexpected birth date and until 14 weeksafter birth, a female salaried employee isentitled to 50 per cent of her salary tobe paid by her employer but manyemployers pay full salary during the saidperiod. A number of collectiveagreements provide for the payment ofpartial or full salary during the pregnancyleave for up to four weeks before theexpected time of birth, during maternityleave for up to 14 weeks and duringpaternity leave for up to two weeks.Finally a number of collectiveagreements provide for the payment offull salary for up to six weeks followingthe maternity/paternity leave. If theemployee is not entitled to salary duringthe pregnancy, maternity and twoweeks’ paternity leave, the parents areentitled to a fixed weekly allowance tobe paid by the Municipality. During theparental leave after the 14th week frombirth, the parents are entitled to a fixedweekly allowance to be paid by theMunicipality for a period of up to32 weeks. A number of collective


47

agreements grant leave for various otherfamily reasons.

9.3 IllnessSalaried employees are entitled to fullpay during absence because of illness.The employer is responsible for thepayment but, after the first 15 days ofsick pay, the employer is entitled to arefund of a fixed allowance for up to 52weeks of absence in an 18 calendarmonth period.

Workers are entitled to a fixed weeklyallowance paid by the Municipality.However, a number of collectiveagreements provide for full salary duringany period of absence due to illness, butafter two weeks of sick pay, theemployer is entitled to a refund of a fixedallowance for up to 52 weeks of ill-health absence in an 18 calendar monthperiod.

For both types of employee, the cost ofabsence due to illness or family leave isborne by the tax system.

10. Health and Safety10.1 AccidentsEmployers must be insured againstaccidents at work with an insurancecompany recognised by the state.Employers may also be held liable fornegligence.

10.2 Health and Safety ConsultationThe Working Environment Act(Arbejdsmiljoeloven) aims to ensure safeand healthy working conditions in theworkplace. To this end, the Act providesthat in workplaces with up to nineemployees safety issues shall be dealtwith between employer and employees.In undertakings employing more thanten but less than 20 employees, a safetygroup has to be elected consisting ofemployer and employee representatives.

In undertakings employing more than20 employees, a safety committee(sikkerhedsudvalg) must be elected.Safety committee representatives have alegal right to be consulted on safetymatters and to take time off to performtheir functions. They may order thesuspension of production activities indangerous circumstances. Breach of theLaw is punishable by fine or

imprisonment. A National Committee onthe Working Environment(Arbejdsmiljoeraadet) acts as a co-ordinating body.

11. Industrial Relations11.1 Trade UnionsA large percentage of Danish employeesare members of a trade union, most ofwhich are affiliated to theLandsorganisationen (“LO”) (by traditionlinked to the Social Democratic Party).A congress is held every four years todetermine LO policy.

There is little legislation on collectivelabour relations. The General Agreement(Hovedaftalen), last amended in 1993,between the LO and the biggestemployers’ association (“DA”) regulatesthe right to join a trade union and totake part in its activities. Local tradeunions which are co-ordinated atsectorial level have legal personality.These local unions are organised atnational level and most of their statutesdo not allow local unions to concludecollective agreements without theconsent of the national union.

Closed shop agreements have recentlybeen prohibited by law.

11.2 Collective AgreementsCollective agreements are legally bindingon both parties and their members, andare also applicable to employees whoare not members of one of the signatoryunions provided the employer was aparty to the agreement. Collectiveagreements can cover all aspects of theemployment relationship includingwages, working hours, holidays andtermination and are automaticallytransferred on the sale of a business.Collective agreements are usually signedfor a period of four years. They cannotbe extended by administrative decree toemployers and their organisations ortheir members who were not parties tothe agreement.

11.3 Trade DisputesIndustrial action tends to be moreinfrequent than in other jurisdictions asDanish law has developed an efficientsystem to resolve disputes.

There is a right to strike if there is a

conflict of interest (interesse-konflikter),i.e. where parties disagree about wagesor the working conditions applicable to aparticular job and where no collectiveagreement is applicable. Such a conflictmay arise, for example, when acollective agreement falls due forrenewal, or when the contract ofemployment provides for an opportunityto renegotiate pay. It is unlawful, on theother hand, to strike if there is a conflictof right (rets-konflikter) i.e. during theperiod of validity of a collectiveagreement when there is a breach of acollective agreement or a dispute overthe interpretation of such agreement. Inthis case, strike action is unlawful andthere is an obligation to refer the disputeto an industrial arbitrator or, if this fails,to the industrial Court. The Courts havepower to fine both parties to anagreement and their members if there isa breach of it. No sanction can beimposed on an employee who refusesto do the work usually done by personstaking part in industrial action.

Where a conflict of interest arises, thematter may be referred to theConciliation Board (Forligsinstitutionen)at the request of either party inaccordance with the Law on MediationProcedures. The Public Conciliator willlead negotiations, put forward proposalsfor a settlement and may also order thepostponement of strike action for up totwo weeks if there is a chance of asettlement.

In cases where there is no alternative toa strike and such action is on the face ofit legal, 14 days’ notice of any strikeshould normally be given to theemployer.


Information, consultation andparticipation is required at various levels:

■ The Companies Act allowsemployees to elect representativesto the board of directors ofcompanies with at least35 employees. The number ofemployee representatives on theboard is up to half the number ofboard members elected in generalmeeting subject to a minimum of



48


two. These representatives have thesame rights, duties and liabilities asthe other members elected ingeneral meeting.

■ Undertakings with more than20 employees must establish asafety committee with employeerepresentatives. The committee mustbe informed and consulted on allmatters relating to health and safety.

■ The Agreement on Co-operationCommittees between LO and DA(samarbejdsudvalg) requirescompanies to be managed in a waythat ensures maximum co-operationbetween employer and employees.To this end, companies with morethan 35 employees must set up aWork Council consisting of equalnumbers of employee and employerrepresentatives. The Council has arole in the decision-making and theplanning processes in relation toworking conditions and day-to-dayproduction. It may intervene in otherareas such as training methods,wage systems, introduction of newtechnology etc. Employeerepresentatives are elected for twoyears and the time spent on Councilmatters is treated as normal workingtime.

■ The Act on Information andConsultation of Employees (lov ominformation og hoering) implementsthe Employee Information andConsultation Directive. Pursuant tothe Act, any company employingmore than 35 employees, and whichis not part of any collectiveagreement that provides for equalrules on information andconsultation, is obliged to inform andconsult the employee representativesor the employees with any relevantinformation regarding the employees’working conditions. The employeerepresentatives must be informedand consulted with as early aspossible to allow the employees’opinions, views and proposals to betaken into consideration when thecompany makes its final decisions.

■ Employees in a European companyare covered by the rules in the Act

on Information and Consultation ofEmployees in European Companies(lov om medarbejderindflydelse i SE-selskaber). The Act implements theWorkers Participation Directive inrespect of employee involvement inthe affairs of European companies.The rules on employeerepresentation in SE-companies arevery complicated. Basically, when aDanish SE-company is established,a special negotiation body ofemployee representatives musteither 1) commence negotiationsand draw up a plan for employeeinvolvement, 2) decide not to opennegations, or 3) terminatenegotiations already commenced. Ifthe special negotiation body drawsup a plan for employee involvement,this plan will set the guidelines foremployee representation. If thespecial negotiation body decides notto open negotiations, the act onemployee representation contains aset of standard rules, which willapply. If the special negotiation bodyterminates negotiations alreadyopened, they will have to rely on theDanish rules on employeerepresentation. Regardless ofwhichever set of rules apply, theemployee representatives are entitledto information and consultationbefore important decisionsconcerning the employees’ workingconditions are made.


12.1 GeneralOn the sale of a business, all thetransferor’s rights and liabilitiesconnected with the transferor’semployees are assigned to thetransferee in accordance with theEmployees’ Rights on Transfers ofUndertakings Act (Lov omLoenmodtageres retsstilling vedvirksomhedsoverdragelse). Thetransferee is not entitled to dismissemployees unless the dismissal is foreconomic, technical or organisationalreasons.


A transferor is obliged to informemployees of any intention to sell the

business and if the transferor or thetransferee envisages measures inrelation to his employees, he mustnegotiate ways of safeguarding theirposition with a view to seeking anagreement. The transferor must informand negotiate/consult with thecompany’s employee representatives.If there are no employee representativesin the company, the information must besupplied to all employees. In additionthe transferor is obliged to inform andconsult the employee representativesfrom the co-operation committee if thecompany is party to a co-operationagreement. This will apply to companieswith more than 35 employees, which areparty to collective bargainingagreements. In addition, companies whoare not party to any collective agreementare bound by the Act on Information andConsultation of Employees (see above).Thus, there are three sets of rulesgoverning the information andconsultation procedure when a businessis sold.

The information must be given to theemployees within a reasonable timebefore the transfer of the business.There is no definitive case law on themeaning of “within a reasonable time”.In some situations, information pursuantto the Act can be given after the signingof an agreement, but before the actualtransfer of a business, provided that theemployees are given reasonable time toconsider the consequences of the sale.This will, however, in most situations betoo late. If the transferor is afraid that theinformation given to the employeerepresentatives will have an adverseimpact on his ability to reach anagreement on the sale of his business,the transferor is entitled to impose aduty of confidentiality on the employeerepresentatives.

The Danish Employees’ Rights onTransfer of Undertakings Act does notcontain any minimum requirementsregarding the length of theinformation/consultation period.Normally, the duration of such a perioddepends on the speed in which theparties reach results in theirnegotiations.

The transferor and the transferee are


49

entitled to complete an agreement onthe sale of a business regardless ofwhether the employees have beeninformed or consulted. Thus, aninfringement of the rules of informationand consultation does not affect thevalidity of such an agreement.

None of the obligations outlined aboveare affected if redundancies arecontemplated prior to or after thebusiness transfer. The obligation toinform and consult the employeerepresentatives exists regardless ofwhether the business transfer involvesredundancies or not. However, othersets of rules may delay the process ifthe business transfer involvesredundancies of more than10 employees, (see below).

12.3 Notification of AuthoritiesThere is no obligation under Danish lawto inform, consult or negotiate with anygovernmental body, but some collectiveagreements contain rules saying that thenegotiations must take place with thetrade unions before the transfer of abusiness. If a transferor fails to complywith this obligation he may be fined forbreaching the collective agreement.

12.4 LiabilitiesIf the transferor fails to comply with theinformation and consultation rules it willface criminal sanctions. Thus, any failureto comply with the rules may, in theorybe sanctioned with a fine, however,there are not yet any reported cases of afine having been imposed.

13. Termination13.1 Individual TerminationThe right of employers to terminatecontracts of employment is limited bylegislation and collective agreements.Different rules apply for terminating theemployment contracts of salariedemployees and workers.

13.2 NoticeThe termination of employment ofworkers is regulated by the applicablecollective agreement. Most agreementslink the length of notice with seniorityand age. In general, employers mustgive notice of between 14 and120 days.

The law provides minimum noticeperiods to be given to salariedemployees. These vary according tolength of service. They amount to onemonth for employees with one to sixmonths’ service and three months forthose with six months’ to three years’service. An extra month’s notice has tobe given for each third year of servicestarting from the fourth year ofemployment up to a maximum of sixmonths.

Regardless of the reason for dismissal,salaried employees with 12, 15 and18 years’ service are entitled toseverance pay of one, two or threemonths’ salary respectively. There is noequivalent for workers.

When the contract of a salariedemployee has been wrongfullyterminated without notice, the employeeis entitled to a payment equal to thenotice period. However, if the noticeperiod exceeds three months, paymentin excess of the three months is onlydue if the employee’s loss exceeds threemonths’ salary. Workers whosecontracts have been terminated withoutnotice are entitled to damages equal tosalary in lieu of notice.

If the contract of employment is notcovered by legislation or a collectiveagreement and there is no expressprovision in the contract dealing withtermination, Courts will apply thecustomary practice for the industrysector.

13.3 Reasons for DismissalWhere the employee is in serious breachof contract, the agreement can beterminated without notice orcompensation.

Workers with more than nine months’service are entitled to know the reasonsfor the dismissal if they request it. Thesame rule applies to salaried employeesregardless of their length of service.

When the dismissal of a salariedemployee with at least one year’sservice is considered unfair and whereno collective agreement is applicable,compensation can be granted. Thefollowing compensation limits apply:

Age Length ofService Compensation

Under 30 1 year Maximum of half the salaryfor the relevant noticeperiod.

Over 30 1 to 10 Maximum of 3 months’ payyears

10 years Maximum of 4 months’ pay

15 years Maximum of 6 months’ pay

For workers with at least nine months ofservice, compensation for unfairdismissal is regulated by the GeneralAgreement between DA and LO.This Agreement provides a procedure ofnegotiation when the dismissal isconsidered unfair by the worker.The maximum compensation for unfairdismissal is fixed at 52 weeks’ pay.A permanent Tribunal on Dismissalsdeals with dismissal claims.

In case of dismissal for economicreasons, the law does not lay down anyspecific selection criteria. However, goodindustrial relations may dictate that anemployer formulates a redundancypolicy.

13.4 Special ProtectionSeveral categories of employees arespecially protected against dismissal.An employer cannot terminate thecontracts of pregnant women oremployees on leave in connection withbirth because of their physical conditionor because of the employees’ pregnancy,maternity, paternity and/or parental leave.If the employer cannot prove that thecontract has been terminated for reasonsother than pregnancy or leave inconnection with birth, compensation canbe awarded. The maximum limit on suchcompensation used to be 78 weeks’salary, however, this compensation limithas recently been removed.

An employer is not allowed todiscriminate against employees orapplicants in respect of recruitment,dismissal, transfer, promotion, salary orworking conditions because of age,disability, race, religion, political or sexualorientation, national, social or ethnicalorigin.

Persons who are discriminated againstare entitled to compensation. Theemployer has the burden of proof indiscrimination cases if the employee can



50


establish facts that may give rise to thepresumption that discrimination hastaken place.

Employee representatives on Health andSafety Committees, shop stewards andon boards of directors are protected inaccordance with the applicablecollective agreement. Employees electedto Works Councils are entitled to sixweeks’ notice on top of the noticeprovided by the relevant collectiveagreement up to a maximum. Employeerepresentatives who are elected toparticipate in a co-operation committeepursuant to the Act on Information andConsultation of Employees andemployee representatives who areelected to participate in the specialnegotiation body pursuant to the Act onInformation and Consultation ofEmployees in European Companies areentitled to the same protection as shopstewards.

If a salaried employee has been ill for atotal of 120 days within a year, he or shemay be dismissed on one month’snotice provided there is a provision tothat effect in the contract. Somecollective agreements provide thatworkers with more than nine months’service cannot be dismissed during thefirst four months of illness.

Under the General Agreement, tradeunion members who claim unfairdismissal can first require negotiation atcompany level between employeerepresentatives and employer. If theparties do not reach any agreement, thecase may be brought to the DismissalsBoard.

13.5 Closures and Collective DismissalsThe rules on collective dismissals willapply if, within 30 days, the followingchanges are planned in relation to theworkforce:

Minimum number ofemployees to be

Size of workforce dismissed

More than 20 and les than 10 employees100 employees

More than 100 and les than 10 per cent of the 300 employees workforce

More than 300 employees 30 employees

In those circumstances, employers areobliged to consult the employees ortheir representatives and a specialprocedure shall be followed.

The purpose of the relevant regulationsis to ensure that negotiations take placewith employee representatives in orderto limit the number of dismissals or theconsequences of them. In case ofinfringement of the applicable law, finesmay be imposed and compensation of30 days’ salary is due to eachemployee; any payment in lieu of noticemay be set off against thiscompensation.

14. Data Protection14.1 Employment RecordsThe collection, storage and use ofinformation held by employers abouttheir employees and workers(prospective, current and past) areregulated by the Danish Act onProcessing of Personal Data (Lov ombehandling af personoplysninger) (theAct), which implements the EU DataProtection Directive. Infringement of dataprotection law can lead to fines and theemployer may be obliged to indemnifyany damage caused by any processingcontrary to the Act.

Broadly speaking the Act requires theprocessing of personal data to bereasonable and lawful, that datacollection takes place for specifiedexplicit and legitimate purposes and thatdata shall not be further processed in amanner incompatible with thesepurposes. Accordingly the employermay only handle personnel informationthat is necessary for the employer tomaintain a proper employmentrelationship.

In addition, the employer may, ingeneral, only process personal data ifthe employees have given their consent.The employees’ consent must take theform of an express consent to theemployer’s processing of data containedin the personnel file, and consent maybe withdrawn at any time. The employeris obliged to specify to the employeeswhat the data will be used for.

The Act does not prevent employersfrom maintaining ordinary personnel files

to the extent necessary for the employerto maintain a proper employmentrelationship or where the employer’sinterests outweigh the employees’interests. Accordingly, ordinarypersonnel files may only include basicinformation such as name, address, nextof kin information, tax information, bankaccount details, the education details,career details, normal curriculum vitaeinformation and references. Theemployer may also process informationthat arises out of the employmentrelationship such as details of duties,salary, pension arrangements, sicknessabsence, warnings and appraisals,unless it is sensitive personal data.

In order to process other information,including the employee’s social securitynumbers and sensitive personal data,the employer must obtain expressemployee consent. Sensitive personaldata includes information relating to anemployee’s health, alcohol and tobaccoabuse, trade union membership, criminaloffences, dismissal without notice,personality tests and the employee’srace or ethnic background, political,religious or philosophical belief, sexualorientation or material social problems.

If an employer processes any kind ofsensitive personal data, it must notifythe Danish Data Protection Agency(Datatilsynet) and obtain the Agency’spermission before such processing iscarried out.

14.2 Employee Access to DataEmployees, as data subjects, have theright to make a subject access request.This entitles them to be informed aboutthe data held about them, the purposeof the registration, whom it is disclosedto and from where the information isobtained.

If the employee does make a subjectaccess request and has requestedwritten information, the employer maycharge DKK 10 per page. However, thetotal amount is limited to a maximum ofDKK 200.

14.3 MonitoringThe monitoring of employee e-mail,Internet, telephone usage and ClosedCircuit TV monitoring is regarded as


51

data processing for the purposes of theAct and, therefore, any monitoring mustcomply with the provisions of the Act.

An employer may not however, monitorconversations and the like as part of anyClosed Circuit TV monitoring.In addition, an employer may not makeany automatic monitoring of the phonenumbers called by its employees.

The employee’s express consent tomonitoring is not usually required,however, the employees should beexpressly informed about the fact thatmonitoring is being carried out and thepurpose for which it is being conducted.


An employer who wishes to provideemployee data to third parties may doso in accordance with the principles andprocessing conditions of the Act. Thetransfer of personnel files from anemployer to a third party is covered bythe Act. Accordingly, such transferseither require the consent of theemployee or must be authorised underthe Act.

Where the third party is based outsidethe EEA, it should be noted that the Actprohibits the transfer of data to acountry outside the EEA unless thatcountry ensures an adequate level ofprotection for personal data or one of aseries of limited exceptions apply.

In the context of commercialtransactions, where employee data isrequested, care must be taken tocomply with the Act. Where possible,anonymous data should be provided,and where this is not possible, therecipient should be required toundertake in writing that it will only use itin respect of the transaction in question,will keep it secure and will return ordestroy it at the end of the exercise.



52

Employment and Benefits in the European UnionEstonia

Estonia1. IntroductionEmployment relations are regulated by anumber of statutes, including theEmployment Contracts Act (“ECA”).In contrast to much employmentlegislation of other member statesEstonian employment law is notunfavourable to the employer. However,as the formal legislative requirements areextraordinarily strict an employer mustadhere meticulously to the prescribedrules regarding the establishment andtermination of employment relations.

The ECA deals with the formation,suspension, modification, terminationand invalidity of employment contractsas well as with respective rights andobligations, and sets out the rules ofsettlement of employment disputes.Government regulations regulate anumber of areas including the issue ofwork permits to foreign employees, theemployment of minors under 15 years ofage, outlawing the performance ofhazardous labour by minors andwomen, the regulation of employmentrelations in bankruptcy cases, theprovision of guidance regarding thecalculation of the average salary.

Employment contract terms that are lessfavourable to employees than thoseprescribed by law, administrativelegislation or a collective agreement areinvalid. Trade unions do not have asignificant influence in Estonia.Therefore, collective agreements do notgenerally have a significant impact onemployment relations and areconsidered voluntary and have beenconcluded in a limited number ofeconomic sectors and companies only.


2.1 GeneralA full-time employee works for eighthours per day and forty hours per week.This is the general national standard.

Part-time employees cannot be treatedin a less favourable manner thanfull-time employees, unless differenttreatment is justified on objectivegrounds (as prescribed by law or

collective agreement). Part-timeemployees have the same rights andobligations arising from the employmentrelationship as full-time employees.

2.2 Directors The ECA does not apply to therelationship between managementboard members and a company.Therefore, it is essential to draw up acomprehensive agreement between thecompany and a management boardmember clearly identifying the tasks andduties of the management boardmember, as well as the remunerationand benefits, holiday entitlement, liabilityof the management board member forbreach of duties and grounds andmeans of terminating the contract.

3. Hiring3.1 RecruitmentEmployers are free to recruit at theirdiscretion. However, an employer isrequired to re-employ an employee whohas been released due to a lay-off withinsix months of the lay-off if the employeeso desires and the employer has vacantpositions.

3.2 Work PermitsIn order to work in Estonia, a non-EUnational must obtain a work andresidence permit from the Citizenshipand Migration Board of Estonia. Theprocedure for non EU citizens takes upto six months and the state fees are asfollows:

■ on applying for a work permit orextending it - 750 EEK (approxc48/£33);

■ on applying for a residence permitfor employment or extending it -1500 EEK (approx c96/£65).

Upon recruitment the employer mustcheck that the individual has the relevantpermit. The employer is not allowed toconclude an employment contract witha person who does not hold a validpermit and must terminate theemployment contract with an employeewho does not hold a permit foremployment in Estonia.

4. DiscriminationEmployers may not, at any stage of the

employment relationship, discriminateagainst persons applying foremployment on grounds of sex, racialorigin, age, ethnic origin, level oflanguage proficiency, disability, sexualorientation, duty to serve in defenceforces, marital or family status, family-related duties, social status,representation of the interests ofemployees or membership of workers’associations, political opinions ormembership of a political party orreligious or other beliefs.

5. Employment Contracts5.1 Freedom of ContractEmployment contracts may be enteredinto for an indefinite or fixed term.However, fixed-term employmentcontracts may be concluded only incertain cases specified by the ECA.

Fixed-term employment contracts maybe concluded for example withemployees who are employed forseasonal work, in order to replace anemployee on maternity leave, or toreplace an employee who has beengranted some specific benefit such asfree training.

5.2 FormEmployment contracts can beconcluded either orally or in writing.Employment contracts concerning workperiods in excess of two weeks must beconcluded in writing.

If the terms of an individual employmentcontract fall short of the requirements ofany applicable collective agreement, theterms of the collective agreement willapply.

5.3 Trial PeriodTrial periods may not exceed fourmonths. Use of a trial period iscommon, but is not compulsory.

An employer can terminate theemployment contract up to the very lastday of the trial period. An employershould, however, be prepared toevaluate the employee’s performance astermination of an employment contractfor no valid reason may be challenged incourt even if the contract wasterminated within the trial period.


53

5.4 Confidentiality and Non-competition

According to the ECA an employee isobliged to maintain the business andproduction secrets of the employer andmust not compete with the employer,without the employer’s permission ifthere are provisions to that effect in theemployment contract. An employee canalso be subject to such confidentialityand non-competition restrictionsfollowing the termination of employmentif an agreement to that effect isconcluded with the employer andpursuant to which the employeereceives compensation for theundertakings.

5.5 Intellectual PropertyIntellectual property rights are regulatedby the Estonian Copyright Act. Themoral rights of an author are inseparablefrom the author’s person and non-transferable. The economic rights of anauthor are transferable as single rightsor a set of rights for a charge or free ofcharge. It is not unusual for anemployment contract to provide that theemployee will transfer his/her intellectualproperty rights to the employer either fora charge or free of charge.

6. Pay and Benefits6.1 Basic PayAn employee’s salary may not be lessthan the minimum pay limit establishedby the Estonian government. With effectfrom 1 January 2007 the monthlyminimum salary for full-time employmentis EEK 3600 (approx c239/£156) andthe minimum hourly salary is EEK 21,50(approx c1.37/£0.93). Salaries are paidby bank transfer or in cash.

There is no obligation to index link pay.

6.2 Private PensionsThere is a “three-pillar” pension systemin place in Estonia. The first pillar is theobligatory state pension; the secondpillar is the mandatory funded pensionsystem implemented in 2002 and thethird pillar is a voluntary supplementarypension system.

6.3 Incentive SchemesThere is no legislative requirement foremployers to operate share option orprofit related pay schemes, and in

practice such schemes are not widelyused.

6.4 Fringe BenefitsFringe benefits are common andtypically comprise the use of mobilephones, company car, laptop etc.

7. Social Security7.1 CoverageSocial tax is a state tax, which ispayable by employers and privateentrepreneurs operating in Estonia,i.e., by legal entities registered in Estoniaand branches of foreign companies andsole proprietors (private entrepreneurs).As the employer must pay the social tax,the place of residence of the employeeis not taken into consideration.

7.2 ContributionsSocial tax is a mandatory monthly taxfrom which public pensions, socialsecurity benefits and health insuranceservices are financed, in accordancewith the Social Tax Act. The social taxrate is 33 per cent of the gross taxablesalary, made up of 20 per cent socialsecurity payments and 13 per centhealth insurance contributions.

Sole proprietors are personally liable forpaying the social tax on the businessprofits less deductions, while the tax perannum is capped at 33 per cent of15 times the yearly minimum salary setby the government.

Another monetary instrument for helpingguarantee social security isunemployment insurance. The premiumpayments are made each payday.The obligation is shared between theemployee and the employer.The employer must withhold thepremium at the current rate of 0.6 percent of the employee’s gross pay andpay an additional 0.3 per cent of theemployee’s gross pay.

8. Hours of WorkAs a general rule, a full-time employee’sworking hours must not exceed eighthours per day or forty hours per week.The working week is five days - Mondayto Friday. The maximum weekly workingtime for minors is shorter and variesfrom 20 to 35 hours per weekdepending on the age of the minor.

The maximum weekly working time forschool and kindergarten teachers andother educators is also shorter.

Any work performed outside thecontractually stipulated hours isconsidered overtime work. As a rule, theemployer must obtain the employee’sconsent before the employee is made towork overtime. Exceptionally, theemployer may require an employee towork overtime in cases such as forcemajeure, in order to deal with theconsequences of a natural disaster or aproduction accident etc.

Regardless of whether overtime work isperformed on a voluntary basis or onaccount of a compulsory request by theemployer, overtime work must becompensated by additional payment ortime off in lieu. Additional remunerationfor overtime must not be less than50 per cent higher than the employee’shourly rate of pay.

9. Holidays and Time Off9.1 HolidayThere are four basic types of leave:primary and additional leave, parentalleave, unpaid leave and study leave. Thelength of primary annual leave is 28calendar days per working year. Theworking year is the period beginning onthe first day of employment and endingon the day preceding the same day ofthe next year. Primary annual leave ispaid according to a formula based onthe employee’s average salary.

Part-time employees are entitled toholiday according to the same rules asfull-time employees. If there is a stateholiday during the vacation, the vacationis extended by the equivalent number ofdays.

Additional leave is granted to theemployees who are engaged inunderground work, work which poses ahealth hazard or work of a specialnature.

Employees are also entitled to begranted study leave in order toparticipate in education and training.

9.2 Family LeaveParental leave includes pregnancy and



54


maternity leave, child nursing leave andadditional child-related leave.

Pregnancy and maternity leave of140 calendar days is granted to awoman on production of a certificate formaternity leave. Such leave starts atleast 70 days prior to the expected birthdate. A benefit equal to the averagedaily income is payable by the HealthInsurance Fund (Haigekassa).

After the pregnancy and maternity leave,one of the parents is entitled to parentalbenefit. The amount of the benefit percalendar month will be 100 per cent ofthe average income of the applicant percalendar month in the precedingcalendar year subject to social tax.The parental benefit payment periodstarts after the pregnancy and maternityleave has ended and continues until455 days have passed as of the first dayof the pregnancy and maternity leave.

In addition, after the period of parentalbenefit, a mother or a father may begranted parental leave at his or herrequest for raising a child of up to threeyears of age. For the duration ofparental leave the employment contractis suspended and the employeereceives a childcare allowance from thelocal pensions board pursuant to theState Family Benefits Act. A father hasthe right to be granted an additionalchild care leave of fourteen calendardays during the pregnancy leave ormaternity leave of the mother or withintwo months of the birth of the child. Anemployee taking such leave receives anominal amount from the state budget.

The employer and the employee mayalso agree upon unpaid leave ofabsence.

In certain cases the employer is obligedto grant unpaid leave of absence (of upto 14 days) at the employee’s request(e.g. in the event of an employee raisinga child under 14 years of age).

9.3 IllnessHealth care coverage applies in respectof people insured under the socialsecurity system either due tocontributions being paid by theiremployer, by themselves, as self-

employed or by the state. Benefits ofvarying percentages of the employee’ssalary will be paid by the HealthInsurance Fund in the event of absencedue to ill-health for up to 250 days percalendar year.

10. Health and Safety10.1 AccidentsThe Occupational Health and Safety Actprovides that the employer has a duty toprovide a safe working environment, andhealthy working conditions. The Act alsodescribes how occupational health andsafety should be organized inenterprises and at the state level andsets out the liability for non-compliancewith its requirements. The Act does notimpose an obligation on employers toprovide insurance for accidents at work.

10.2 Health and Safety ConsultationThe Act requires, among other things,that there are health and safetymanagers in every company and electedhealth and safety delegates in allcompanies with more than tenemployees. Companies with at least50 employees must have a health andsafety council with whom to consult onall health and safety matters.

11. Industrial Relations11.1 Trade UnionsTrade union membership is generally lowin Estonia and the negotiating power ofthe unions is rather limited. There aretwo main trade unions:

■ The Association of Estonian TradeUnions (EAKL) established in 1990being the largest and predominatelyblue-collar oriented;

■ The Estonian Employees’ Unions’Confederation (TALO) established in1992, which represents white-collaremployees.

The legal status of trade unions isregulated by the Trade Unions Act(2000). A trade union is considered tobe a type of non-profit makingorganization. The legal personality of atrade union begins when it has beenregistered in the register of the tradeunions and it ends when the trade unionis removed from the register.

The law also regulates the rights ofemployees to establish a trade unionand act as its representatives.

11.2 Collective AgreementsCollective bargaining at various levels isstill quite weak, as the social partnersorganizations are still quite young andonly a small number of agreements havebeen concluded. Collective agreementstend to predominate in specific sectorsof the economy, such as transport,engineering, food, wood, textiles andclothing and chemicals.

Collective agreements may cover anytopic or workplace issue. In practisethese deal with pay and other terms ofemployment, such as working time,severance payments, retirement age,plus issues to do with the trade union’sfacilities. The terms and conditions of acollective agreement, which are lessfavourable to employees than thoseprescribed by a Collective BargainingAgreements Act or other relevantlegislation, are invalid. In the event of aconflict between the provisions ofdifferent collective agreements applicableto employees, the provisions that aremore favourable to the employees apply.

As a rule the collective agreements donot apply to non-parties to the collectiveagreement.

11.3 Trade DisputesThe Trade Unions Act defines whom thetrade unions must represent in a disputeand sets out the legal powers of theirrepresentatives. It grants unions the rightto protect the interests of their membersin collective disputes.

The parties are required to comply withthe terms and conditions of a collectiveagreement during the term of thecollective agreement and refrain fromcalling a strike or lockout in order toamend the terms and conditionsprovided for in the collective agreement.

The federation of employees andfederation of employers may deal withlabour disputes that arise from collectiveagreements. In the event that a disputecannot be resolved by the federation,the parties may refer the dispute to thePublic Conciliator.


55


In order to represent, exercise andprotect the rights and interests ofemployees, trade unions have a right ofparticipation in employee informationand consultation processes, and, to acertain extent in decision-makingprocesses as provided by the TradeUnion’s Act, and other applicablelegislation and agreements.

There is not an established history ofworks councils. However, legislationgiving effect to the Employee Informationand Consultation Directive was enactedin February 2005, so the position maychange.

12. Mergers andAcquisitions

12.1 GeneralThe effect of mergers and acquisitionson employment contracts is regulated bythe ECA. The rights and obligationsarising from an employment contracttransfer to the new employer in thefollowing cases: (i) in the case of merger,division or transformation of employingentities; (ii) if the functions of a bodyadministered by an administrative agencyare fully or partially transferred to anotherperson, if after the transfer the same orsimilar activities are continued; (iii) in theevent a business entity operating incommerce or for other purposes, or anorganisationally independent part thereof,is transferred from one person to anotheron any legal basis, if after the transfer thesame or similar activities are continued.

The ECA provides that reorganization, orchange in ownership of a business doesnot terminate an employment contractnor serve as grounds for termination.Employees have the right to continueworking at the business formed as aresult of reorganization or following atransfer to a new owner.


The ECA sets out the procedure forinforming and consulting the employees’representatives (e.g. trade union) inrelation to the transfer of employmentcontracts or if there are no suchrepresentatives, the employees of thecompany.

There is no threshold number ofemployees triggering this obligation.The information and consultationobligation is triggered whenever one ofthe above-mentioned merger andacquisition events occur.The consultation obligation is triggeredin the event that the former or newemployer envisages taking ’measures’in relation to his employees inconnection with the transfer ofemployment contracts; the employer isobliged to consult the representatives ofthe employees on such measures witha view to reaching an agreement.

The former and the new employer mustprovide the representatives of theemployees with all relevant informationin writing, or in the absence ofrepresentatives directly to theemployees, in good time, but not laterthan one month prior to the transfer ofthe employment contracts.

During the consultation process, therepresentatives of the employees havethe right to meet with therepresentatives of the employer and themembers of the directing bodies of theemployer and submit, within fifteen daysof receipt of the written information, theirwritten proposals with regard to theproposed measures in relation to theemployees, unless a longer period isagreed upon. Employers are required togive reasons for refusal to consider suchproposals.

12.3 Notification of AuthoritiesThere is no general obligation to informgovernmental or regulatory bodies aboutthe transfer of employment contracts.However, the notification andconsultations may be triggered bycollective lay-offs etc.

12.4 LiabilitiesAn employer who violates theinformation or consultation requirementmay be punished by a fine.

A sale and purchase agreement can besigned before the information andconsultation process is started howeverclosing cannot occur before completionof information and consultation; i.e. theemployment contracts cannot transferprior to the process being completed.

13. Termination13.1 Individual Termination Employers must ensure that there aresuitable grounds for dismissal and thatthe appropriate notice requirements areadhered to.

If the court finds that dismissal wasunlawful, the normal remedy is to orderthe employer to reinstate the employee.Upon reinstatement of an employee toemployment, a labour dispute resolutionbody will also order the employer to paythe employee his/her average wages forthe period of compelled absence fromwork, except in special cases prescribedby law. If reinstatement is not anappropriate remedy, compensation of upto six times the employee’s monthlyaverage salary can be awarded instead.The court or individual labour disputecommittee determines the specificamount of compensation.

13.2 NoticeAn employer is required to give anemployee prior written notice oftermination of the employment contract.Different notification periods applydepending on the statutory groundsinvoked for terminating the contract.Notice periods vary from two weeks(if an employee is being terminated forlong-term incapacity) to four months(in the event an employee who has beenwith the company for more than tenyears is laid off).

An employer who has decided toterminate an employment contract mayrelease an employee from his postsimmediately. However, the employer isobliged to pay salary during the entirenotice period. Employers who do notadhere to the notice requirementsdescribed above are liable for additionalpayments. If an employer fails to complywith its notice obligations, it is requiredto pay the employee compensationequal to a day’s average wage for eachday of notice not given.

Summary termination without notice orcompensation is permissible only inextreme circumstances, such as in theevent of a severe violation of work dutiesby the employee which has aggravatingresults e.g. endangering the employer’sproperty, other employees or third



56


parties. In the event of a loss of trust inthe employee, there is also no obligationto give notice or pay compensation.

13.3 Reasons for dismissalGrounds for dismissal are theunsuitability of the employee for his/herposition or work due to the employee’spoor vocational skills or the employee’sprotracted incapacity for work due to illhealth.

13.4 Special ProtectionTermination of an employment contractis prohibited if the employee is onholiday, parental leave and unpaid leaveor temporary leave of work due to atemporary reduction in work.An employer is also prohibited fromdismissing pregnant women or anemployee raising a child under three,except in limited circumstances such asthe liquidation of the employer or loss oftrust.

13.5 Closures and Collective DismissalsThe law defines dismissals as“collective” when a specific number ofemployees are collectively laid off withina 30 day period for reasons which arenot related to the behaviour or theabilities of the employees, e.g. closure ofthe employer’s business. A collectivedismissal will arise when:

■ An employer who employs up to19 employees terminates theemployment contracts of at least fiveemployees; or

■ An employer of 20 to 99 employeesterminates the employment of atleast 10 employees; or

■ An employer of 100 to 299employees terminates theemployment of at least 10 per centof employees; or

■ An employer of 300+ employeesterminates the employment of atleast 30 employees.

Prior to a collective redundancy anemployer must consult with theemployees’ representatives with the aimof reaching an agreement in relation tothe following issues: the possibility ofavoiding or reducing the number of

redundancies, possible measures toalleviate the consequences of theterminations and ways of supporting thedismissed employees in their search forwork, re-training or in-service training.During the consultation process theemployees’ representatives have theright to meet with the representatives ofthe employer and submit theirrepresentations within a period of fifteendays after the receipt of the employer’sconsultation notice.

14. Data Protection14.1 Employment recordsThe Personal Data Protection Actregulates the collection, storage and useof the information held by the employersabout their employees.

14.2 Employee Access to DataAn employee has the right to receivecopies of personal data relating to himor her from the employer.


57

Finland1. IntroductionThe most important concept in labourlaw in Finland is the employmentrelationship.

Employment is based on statute,collective bargaining agreements and onthe principle of freedom of contract.Freedom of contract is limited both bycollective bargaining agreements, whenapplicable and by mandatorystipulations enacted to protect theemployee.

Traditionally central collective bargaininghas been the most important factor, andtoday collective agreements have inputfrom trade unions, employers and theGovernment. Such agreements aregenerally at sector or industry level.Agreements at company level have,however, during recent years become anessential part of the collective bargainingprocess. Even employers who do notrecognise trade unions (“non-organisedemployers”) have to some extent theright to observe the same terms ofgenerally binding collective agreementswhich previously only employers whorecognised trade unions (“organisedemployers”) were entitled to apply.


2.1 GeneralAll employees other than a managingdirector are subject to statutory labourlaw.

2.2 DirectorsThe managing director of a company isnot subject to statutory labour law.The terms of employment of a managingdirector are exclusively governed by theindividual contract. The employment ofsenior executives and directors issubject to statutory labour law. Seniorexecutives working directly under themanaging director are, however,exempted from the application of theWorking Hours Act.

2.3 OtherUnder the provisions of the EmploymentContracts Act a part-time employeemust be given priority when applying for

a similar full-time position. There are noadditional special provisions relating topart-time employees. However,collective bargaining agreementsnormally include provisions on part-timeemployees.

3. Hiring3.1 RecruitmentAn employer who in the previous ninemonths has dismissed employees byreason of redundancy must enquire atthe local labour office whether any ofthose former employees are registeredas seeking work via an employmentoffice. If so, employment has to beoffered in the first instance to suchformer employees. Employers areotherwise free to recruit as they wish ona non-discriminatory basis.

Executives are often recruited by head-hunting firms.

3.2 Work PermitsFor a non-EU national to work inFinland, he or she must obtain aworker’s residence permit from a FinnishEmbassy abroad. Depending on theduration and nature of the work aresidence permit may be sufficient andfor specific categories of short termassignments no permit may benecessary.

EU nationals and citizens of Iceland,Liechtenstein, Norway and Switzerlandcan freely work in Finland, provided thework lasts a maximum of three months.Where the duration exceeds threemonths they must register their right toreside in Finland, but they do not need aspecial residence permit.

4. DiscriminationAccording to the Employment ContractsAct an employer must treat employeesimpartially without any unwarranteddiscrimination on the basis of ethnicorigin, religion, age, health, political orlabour union activity, or any comparablereason. The Act on Equality BetweenWomen and Men prohibitsdiscrimination on the basis of gender.An employer violating these rules maybe liable for damages, compensation,fines or imprisonment.


5.1 Freedom of contractIndividual employment contracts areregulated by the Employment ContractsAct (26.1.2001/55). The provisions arepartly optional and partly mandatory.Optional provisions will apply unless theparties have agreed otherwise, or anapplicable collective bargainingagreement provides otherwise.

If the terms of an individual employmentcontract fall short of the requirements ofany applicable collective agreement, theterms of the collective agreement apply.

5.2 FormA contract may be agreed orally or inwriting. However, an employer mustinform an employee of the basic termsof the employment relationship inwriting, if the contract is oral or if theseterms are not included in a writtencontract. The provisions of theEmployment Contracts Act(implementing the provisions of Directive91/533/EEC) deal with an employer’sobligation to inform employees of theconditions applicable to the contract ofemployment.

A fixed-term contract can only beentered into in special circumstances,e.g. the temporary nature of the post,training or similar. If the contract is madefor a fixed-term exceeding five years,after five years it may be terminated as ifit was made for an unspecified period.

5.3 Trial PeriodsTrial periods cannot normally exceedfour months or, with regard to fixed-termemployments half of the duration of thefixed term. They are usual but notcompulsory.

5.4 Intellectual PropertyStatute provides that the title toinventions created by employees duringemployment vests in the employer.The employee is, however, entitled to areasonable compensation.

Copyright issues are not dealt withunder statute and thus the terms of theemployment contract must regulate thequestion of ownership of copyrightmaterial. There is, however, a customary

Employment and Benefits in the European UnionFinland


58


rule stating that should the employmentcontract lack provisions dealing withcopyright ownership, employerownership is presumed if it is in thenature of the employment relationship tocreate copyright material. In addition,there are special rules in relation tocomputer programs. These rules, whichare incorporated into the Copyright Actand which are the result ofimplementation of the Directive91/250/EEC, state that the copyrightbelongs automatically to the employer ifnot otherwise agreed in the employmentcontract.

6. Pay and Benefits6.1 Basic PayThere is no defined statutory minimumwage, but most collective agreementsset a minimum wage, which is normallynegotiated yearly or every two years.The employee is, however, entitled to areasonable and normal remuneration forthe work performed.

Unless otherwise agreed, salary must bepaid in cash at or near the place ofwork. In practice, the salary is usuallypaid to the bank account of theemployee.

6.2 Private PensionsIt is a legal requirement that allemployers provide a minimum levelemployment pension plan. All pensionsare reviewed annually and adjustedaccording to an index taking intoaccount prices and wages. During2006, 4.3 per cent of the gross salary ofemployees under 53 years of age and5.4 per cent of the gross salary ofemployees aged 53 years or over iscontributed by employees towards thecost of the plan. Employers meet thebalance of the cost. Some companiesprovide additional pension coverage fortheir employees especially inmanagement positions.

7. Social Security7.1 CoverageThe state social security system providesa comprehensive range of benefits:retirement pensions, unemploymentbenefits, survivors’ benefits, disabilitypensions, industrial injury benefits, cashsickness benefits, health insurance,maternity benefits and family allowances.

7.2 ContributionsThe employer’s basic contribution variescurrently between 2.958 and 6.058 percent of the wages.

It is a legal requirement that allemployees shall be covered by anunemployment insurance. During 20060.58 per cent of the employee’s grosssalary is contributed to the insurance bythe employee. The employer’scontribution is 0.75 per cent of thegross salary up to EUR 840,940.00 andthereafter 2.95 per cent. Thecontribution rate varies annually.

8. Hours of workDetailed laws exist on hours of work; thenormal maximum is 40 hours a week,eight hours per day. However, based oncollective bargaining agreements thelength of a working week is usuallybetween 37 and 39 hours.

There are specific provisions relating toovertime. The Working Hours Act, theprincipal statute relating to workinghours, provides that daily overtime mustbe compensated at a rate equal to anincrease of 50 per cent on normal payfor the first two hours of overtime and100 per cent on normal pay for anyextra hours. Work performed onSundays or on public holidays must alsobe compensated with double pay. Theparties can agree that overtime work iscompensated by time off. The length ofthe time off is calculated as describedabove.

9. Holidays and Time Off9.1 HolidaysStatutory holiday is four to five weeksper year, depending on the length ofservice of the employee (two workingdays per month, if the length of serviceis less than one year at the end of theholiday accrual year; otherwise 2.5working days per month, Saturdaysbeing considered as working days).There are also several public holidays.Collective bargaining agreementsprovide for a bonus of 50 per cent ofholiday pay for statutory holiday.

9.2 Family LeaveThe Social Insurance Institution providesallowances in the event of sickness andfor maternity, paternity and parental

leave. There are specific statutoryprovisions concerning employees’ rightsto take time off to pursue education,union activities or to take care ofchildren. Female employees are entitledto 105 days’ maternity leave and maleemployees are entitled to 18 days’paternity leave which may in certaincircumstances be prolonged by12 days. In addition, the mother or thefather may take parental leave after thematernity leave. The parental leave ends263 days after the first day of thematernity leave. An average of 65 percent of gross salary is paid by SocialSecurity during maternity and/orparental leave. Many collectivebargaining agreements include anobligation on the employer to pay salaryduring the first weeks or months of thematernity leave.

Statute prevents the termination ofemployment because of compulsory orvoluntary military service. Termination ofemployment during (or because of)pregnancy or during maternity, paternity,parental or child care leave is withcertain minor exceptions prohibited.

10. Health and Safety10.1 AccidentsHealth and safety in the workplace isgoverned by strict rules, to ensure thatthe working environment is suitable forthe nature of the work to be carried out.All employers are obliged to take outinsurance to cover personal injury anddisease suffered by their employeesduring, or because of, their employment.

10.2 Health and Safety ConsultationThe law requires, among other things,that there are health and safetymanagers in every company and electedhealth and safety delegates in allcompanies with more than tenemployees. Companies with 20 or moreemployees must have a health andsafety council (75 per cent of themembers of which must be employeedelegates) to be consulted on all healthand safety matters.

11. Industrial Relations11.1 Trade UnionsAbout 80 per cent of Finnish employeesare members of a trade union.


59

The main employees’ unions are:

(i) SAK, the Central Organisation ofFinnish Trade Unions, representingmainly blue collar and low gradesalaried workers;

(ii) STTK, the Confederation ofTechnically Skilled Employees,representing technically skilledemployees and mainly professionalsupervisors; and

(iii) AKAVA, the Confederation of Unionsfor Academic Professionalsrepresenting highly educated andacademically skilled employees.

The Act on Co-operation withinUndertakings (1978) and theRepresentation of Personnel within theManagement of Undertakings Act (1990)give employees the right to be consultedon decisions which affect theiremployment. These regulations alsoenable employees to influence decisionmaking to some extent. According tothe Act on Co-operation WithinUndertakings employers with 30 or moreemployees must consult the employeesor their representatives prior to makingdecisions on matters such asenlargement, redundancy, working timeorganisation, changes to jobspecification, employee transfers andchange of location. In companies with150 or more employees the employermust arrange employee representationon the supervisory board, on the boardof directors or in a corresponding organ,if the employees so request.

According to the Act on Co-operationWithin Undertakings employees’representatives also have the right ofaccess to full statements of accountsand to information about the company’sfinancial situation.

11.2 Collective AgreementsCollective bargaining agreements aremade between employers and tradeunions generally at industry or sectorlevel but also at company level.The agreements usually have effect forone or two years, and cover a widerange of issues, including minimum pay,employee and employer co-operationand health and safety matters.

Collective agreements bind not only theparties to the agreement, but also anyassociation of employers and employeesthat are, directly or indirectly, membersof either signatory parties.

Generally binding collective bargainingagreements also bind “non organised”employers. A collective bargainingagreement is declared generally bindingwhen the number of employees workingin companies bound by the collectivebargaining agreement is approximately50 per cent of all the employees in thatsector of business.

11.3 Trade DisputesCollective bargaining agreementsimpose an obligation to refrain fromindustrial action, such as strikes, go-slows or lock-outs. Such action is,however, forbidden only if the purposeof the industrial action is to inducechange in collective bargainingagreements or the Collective BargainingAgreement Act. However, this obligationdoes not apply to individual employees.

11.4 Regulatory BodiesProcedures and bodies exist in Finlandto deal with disputes which arisebetween employers and unions.

The National Conciliators’ office dealswith disputes which arise duringcollective bargaining. The two partiesare free either to reject or accept theproposals of the conciliator.

If a dispute arises from the interpretationof a collective bargaining agreement, it isdealt with by the Labour Court whosedecisions are final. The Labour Courthas the power to impose penalties forbreach of a collective bargainingagreement.


The Co-operation Within UndertakingsAct includes provisions on theemployer’s obligation to inform orconsult with the employees or theirrepresentatives prior to taking finaldecisions on different matters coveredby the Act.


12.1 GeneralThe effect of acquisitions and mergerson employment contracts is regulatedby the Employment Contracts Actimplementing the relevant directives ofthe European Union.

The transfer of shares of a limited liabilitycompany does not have any effect onemployment contracts and does notgenerate any consultation or informationobligations on the part of the employingentity.

The Employment Contracts Act providesthat when a business is transferred, allthe employees within that business aretransferred with it. The transferor’s rightsand obligations are automaticallyassigned to the transferee. The transferper se does not give the new employerthe right to dismiss employees, theemployer must have a valid ground fordismissals, for example, financial andproduction related reasons andorganisational restructuring of thebusiness due to the transfer. Theemployer has to justify the dismissal.

In the context of a business transfer theemployees of the business are entitledto terminate their employmentrelationships with effect from the date oftransfer regardless of their noticeobligation or the duration ofemployment, if they have been informedof the transfer not less than one monthbefore the date of transfer. If theemployees are informed of the transferlater than that, they are entitled toterminate their employment relationshipwith effect from the date of transfer, or,on a later date provided it is within onemonth of having been informed of thetransfer.

The information, consultation,negotiation and notification obligationsoutlined below are equally applicable inthe context of mergers, the mergingcompany assuming the transferor’sobligation and the receiving companyassuming those of the transferee.


Companies employing at least



60


30 employees, (on a regular basis) areobliged to supply information and/orconsult or negotiate with the employeesaffected by the transfer of a business ora merger, or their representatives byvirtue of the Act on Co-operation withinUndertakings (22.9.1978/725 asamended).

The transferor and the transferee areobliged to provide the employeerepresentatives with specific informationin relation to the business transfer.The transferor has to inform theemployee representatives in good timebefore the transfer is executed.In practise the transferor has noobligation to inform the employeerepresentatives prior to the signing ofthe transfer documentation, but shouldinform them without delay after thesigning. There is no established time limitas to when the information ought to beprovided by the transferee, but normallythe parties inform the employees jointly.

Following a business transfer a co-operation procedure is commenced,in order to determine whether thetransferee is proposing to takemeasures (e.g. reducing hours ormaking lay-offs lasting at least 90 daysor terminating employment) that willtrigger an obligation on it to negotiate.

A proposal for these negotiations has tobe submitted by the transferee withinseven days of the business transfer(i.e. from the date of the completion ofthe transaction). The negotiations canbe started after three days from thesubmission of the proposal.The duration of the negotiation is notregulated. If the transferee has, due tothe transfer, planned measures that fallwithin the scope of the co-operationprocedure (such as reducing hours,making lay-offs lasting at least 90 daysor terminating employment) a separatenotification and co-operation proceduremust be carried out prior to any finaldecision being taken in relation to themeasures.

The co-operation procedure usuallytakes place after the transfer isexecuted. However, it is possible to startthe co-operation procedure earlier.Where a co-operation procedure is

started before the transfer is executed,the transferee will usually participate inthe process in order to benefit from thenegotiations conducted.

The co-operation procedure itself(including the proposal for negotiations,conducting of negotiations andnotification of the manpower authorities)must comply with the detailedstipulations set out in the Act on Co-operation within Undertakings. If ameasure subject to negotiation is likelyto result in full-time employmentcontracts being reduced to part-timecontracts, in lay-offs lasting at least 90days or the termination of employmentcontracts of fewer than ten employees,the minimum duration of thenegotiations is seven days. If themeasure is likely to result in contractsbeing reduced to part-time status, lay-offs lasting at least 90 days and/or thetermination of employment of ten ormore employees, the negotiations mustlast at least six weeks. The parties mayhowever agree on a shorter time periodfor the negotiations.

12.3 Notification of AuthoritiesIf the measures subject to negotiationsinclude a proposal to reduce personnel,the manpower authorities have to beinformed about certain specified factsconcerning the planned measures.The information has to be delivered tothe manpower authorities no later thanthe commencement of the negotiationprocess.

12.4 LiabilitiesA person belonging to the groupmanagement, the employing entity,employer or a representative of either,who intentionally or throughcarelessness fails to observe theinformation, consultation or negotiationobligations will be liable to a fine.

In certain circumstances an employeemay be entitled to compensation fromthe employer of up to 20 months’ salaryif the appropriate negotiation process isnot completed, whether deliberately orby negligent omission.

There are no specific penalties for failingto notify the manpower authorities,however it may impact on the level of

compensation payable to theemployee(s) and may lead to a remarkfrom the supervising authority, theMinistry of Labour, although in practicethis is quite rare.

13. Termination13.1 Individual TerminationAn employment contract for an indefiniteperiod can only be terminated withimmediate effect during a trial period orbecause one party has committed a“serious offence”. In addition, anemployer may be entitled to rescind thecontract if the employee is permanentlydisabled or persistently fails to fulfil hisobligation to work, and an employeemay be entitled to rescind the contract ifthe employer fails to pay remunerationor provide sufficient work. If theemployer has terminated or wishes toterminate the employment contract withimmediate effect, he has to show thatthere are or were sufficient groundsjustifying the dismissal. The burden ofproof as to whether there are or weregrounds justifying a summary dismissalis on the employer.

An employment contract made for aspecific period is terminated withoutnotice when the period expires.

An employer failing to comply with therules concerning termination ofemployment is liable to the dismissedemployee for damages and/orcompensation. The amount ofcompensation varies between3-24 months’ salary of the employee.The amount is determined on a caseby case basis taking into account allthe relevant circumstances.

13.2 NoticeIf no “serious offence” has beencommitted, an employment contract canonly be terminated on the giving ofnotice. Under the EmploymentContracts Act, employer’s notice periodsare as follows:

Employee Service Period of Notice

Less than 1 year 14 days

1-4 years 1 month

4-8 years 2 months

8-12 years 4 months

More than 12 years 6 months


61

unless (a) otherwise agreed by theparties or (b) the applicable collectiveagreement stipulates otherwise.

If the employee wishes to terminate thecontract the period of notice is (a) twoweeks if the employment has lasted lessthan five years; (b) one month if theemployment has lasted over five years,unless otherwise agreed by the parties.

Unless otherwise provided for in theapplicable collective bargainingagreement, the parties can agree onnotice periods not exceeding six monthsand may provide that the notice to begiven by the employee may never belonger than that to be given by theemployer.

13.3 Reasons for DismissalEven with notice an employmentcontract for an indefinite period cannotbe terminated by an employer unlessthere is an “especially weighty reason”.Such reasons are specified in theEmployment Contracts Act but in anegative manner only, that is, the Actstates grounds that cannot be regardedas especially weighty. The listed groundsare the following: illness (if it has notcaused a substantial and permanentreduction of working capacity in theemployee); participation in a strike orother industrial action; political, religiousor other views and activities in public orin any association; exercising a statutoryor other legal right. It is for the employerto justify a dismissal.

13.4 Collective DismissalsAn employment contract for an indefiniteperiod can be terminated on thegrounds that there has been a majorreduction in the amount of work foreconomic or related reasons, providedthe reduction is not just temporary.However, dismissal is deemed to beunjustified in the followingcircumstances: if prior to or after thedismissal a new employee has beenrecruited to perform the same orcorresponding duties to thoseperformed by the former employee; anyreorganisation of duties which does notin reality reduce the amount of work tobe done. The employer has to be ableto show sufficient grounds for adismissal.

If the Act on Co-operation withinUndertakings is applicable, the employermust consult the employees or theirrepresentatives prior to the dismissals.The notice of these consultations mustbe given in writing. The period of noticeis five days. The minimum duration ofthe negotiations depends on how manyemployees are going to be maderedundant. If the termination ofcontracts involves less than tenemployees the negotiation period is aminimum of seven days. If it involves tenor more employees the negotiationperiod is six weeks. The parties to thenegotiation have the right to agree onother and even shorter negotiationperiods.

14. Data Protection14.1 Employment RecordsThe principle piece of legislationgoverning data protection in Finland isthe Personal Data Act 1999 (“FDPA”),which implements the Data ProtectionDirective. The Act on Protection ofPrivacy in Working Life 2004 (“WLA”)and the Act on Co-operation withinUndertakings 1978 also regulate dataprotection. The FDPA regulates thecollection, storage and use ofinformation held by employers abouttheir employees. The Data ProtectionOmbudsman and the Data ProtectionBoard, among others, supervise theinterpretation of the law.

An employer, as the data controller, isunder an obligation to ensure that itprocesses all personal data inaccordance with the provisions of theFDPA. The collected data must be:required for a specific purpose,accurate, up to date, and not storedlonger than necessary. In addition, thepersonal data must be stored securelyto avoid unlawful access or accidentaldestruction or damage. Sensitive datamay only be processed in accordancewith the specific provisions of the FDPA.The WLA includes separate provisionsconcerning processing of data on theuse of drugs. In certain circumstancesan employer is entitled to process dataentered in certificates on drug tests.

The data controller must keep a recordwith details on the nature of the dataheld and the purpose for which it is

processed. The record must be heldavailable for the employees.

14.2 Employee Access to DataEmployees have the right to make anaccess request concerning the datastored about them by the employer.The right to access includes also a rightto be given details of who the data hasbeen disclosed to. The informationrequested by the employee shall beprovided without needless delay. If theinformation has not been provided withinthree months of the request, it isclassified as a refusal of the subjectaccess request. The matter may then bebrought to the Data ProtectionOmbudsman. A reasonable fee may becharged if employees make requestsmore often than once a year. The feecannot exceed the actual expensesincurred by the employer.

14.3 MonitoringTechnical monitoring of email (i.e. wherethe contents of emails are notmonitored) by the employer must bediscussed with the employeerepresentatives in accordance with theAct on Co-operation within Undertakingsprior to the introduction of suchmonitoring. E-mails belonging to theemployer can be opened and read byanother person with the employee’sconsent according to the rules agreedon at the working place. If the employeedoes not give his/her consent, the WLAincludes provisions setting out theprocedure to be followed in order toretrieve and open e-mail messagesbelonging to the employer. Thisprocedure is detailed and multi-phasedand is aimed at ensuring and protectingprivacy. Prior to embarking on such aprocedure an employer must haveoffered the employee an alternativeoption to be used in case of absence.

The WLA also regulates the use ofcamera surveillance in the work place.


An employer who wishes to providepersonal data to third parties must doso in accordance with the FDPAprinciples and processing conditions.Transmission within the EEA is allowed.The transfer of data to a third party



62


based in a country outside the EEA ispermissible only if the country ensuresan adequate level of data protection orone of a number of other specificprovisions are satisfied. Such transfersare permissible, however, where theemployee gives his express consent tothe transfer of personal data to thirdparties outside the EEA.


63

France1. IntroductionEmployment relationships in France areprincipally regulated by the Labour Code(Code du travail), collective-bargainingagreements, internal regulations andpractices. In the event of conflictbetween the terms of the varioussources, and subject only to legalrequirements which are matters of publicpolicy, the terms which are mostfavourable to employees will prevail.

The Labour Code is intended to grantindividual and collective rights at work. Itis not possible to contract out of mostof its provisions. The system is intendedto allow trade unions to supplement andbuild upon the Code through legallyenforceable collective-bargainingagreements (conventions collectives)negotiated for each sector of industryand for each region.

Collective-bargaining agreements arelegally binding between the employersand unions in the relevant industrialsector. Successive Governments have“extended” the provisions of collective-bargaining agreements to all employersin a particular sector, even if they werenot signatories to a collective-bargainingagreement in that sector, therefore,virtually all sectors of the economy arecovered by these agreements. The termsof such agreements are deemed to formpart of the employment contract.

Industrial Relations Courts (Conseils deprud’hommes) have exclusive firstinstance jurisdiction in employmentdisputes. These Courts are made up ofemployer and employee representatives.Appeals (in so far as they are possible)are made to the labour sections of thelocal Court of Appeal and then to theSupreme Court (Cour de Cassation).Professional judges sit in these twohigher Courts.

Professional judges have exclusivejurisdiction in relation to collectivelitigation involving representatives, tradeunions and staff.

Labour Inspectors (Inspecteurs duTravail) have various responsibilities with

regard to enforcing employmentregulations. Although they concentratemost of their activities on industrialundertakings, an employer can expect aprompt visit in the event of, for example,an accident at work, or a lengthy anddetailed investigation when an employerwishes to dismiss employees becauseof economic pressure or organisationalchanges.


2.1 GeneralLaws and collective regulations make adistinction between executives andother categories of employees. Broadlyspeaking, most white-collar employeesas well as senior executives areconsidered “cadres”.

This status is of significance in thecontext of the working time regulations(see further below)

2.2 DirectorsOffice holders such as Chairmen, BoardMembers, Managing Directors andManagers (Gérants) of limitedcompanies (Société Anonyme – SA orSociété à Responsabilité Limitée –SARL) are normally considered to becompany officers and not employees.Their relationship with the company iscovered by company law and notemployment law. Board Directors maynot, in that capacity, receiveremuneration other than for attendingboard meetings or for specialassignments. Generally, except on theincorporation of a company, a directormay not become an employee (whilstremaining a director) but an employeemay become a director (and remainemployed) provided he or she hasalready been employed by the company,continues to use a technical skill (as afinancial director, for instance), receivesremuneration and exercises a salariedfunction under the control of anotherperson. When an employee becomes adirector, he or she may continue thesalaried functions. If those, however, arenot separate from the office of director,the contract of employment is normallyconsidered suspended and is thenrevived when the directorship ceases.

3. Hiring3.1 RecruitmentEmployers can recruit from a variety ofsources. The employment service run bythe state (ANPE) provides a freerecruitment service for employers andjob seekers but this is not extensivelyused by employers. Executiverecruitment agencies may be used forsenior or specialist staff. The local andnational press are used by employers fordirect recruitment. Advertisements forstaff must usually be in French evenwhen an employer is looking to recruitsenior staff with foreign-language ability.

In the event that specific techniques areused in the framework of the recruitmentprocess, there is a legal requirement thatthe candidate is informed of the use ofsuch techniques. The results of thepossible recruiting tests must be keptconfidential and communicated to thecandidate.

There is a requirement for companiesemploying at least 20 employees that apercentage of positions be reserved fordisabled persons (at present six percent). Failing to comply with thisrequirement obliges the employer tocontribute to a specific fund dedicatedto the development of employment fordisabled persons (AGEFIPH).

3.2 Work PermitsNon-EU nationals cannot usually beemployed without a work permit(autorisation de travail). A work permitshould be obtained outside France bysubmission of the appropriatedocuments, including the proposedemployment contract, to the Ministry ofLabour via the local French consulate.Work permits are usually only issued forsenior management positions.

If residence exceeds three months, aresidence permit (carte de séjour) isrequired. This is obtained from the localrepresentatives of the French HomeSecretary (Préfectures, in ParisPréfecture de Police).

4. DiscriminationThe Labour Code prohibits discriminationon grounds such as sex, lifestyle, race,age, physical appearance, religion,political opinions and union activities.

Employment and Benefits in the European UnionFrance


64


When sexual discrimination is alleged,the employer has to prove that he hasnot acted in a discriminatory manner.Failure to prove this will lead to an awardof damages by the Industrial Tribunal(Conseil de prud’hommes). In addition,the Penal Code imposes penalties forinfringement.

There is a general principle of equal payfor the same work; men and womenmust receive equal pay for the samework and be treated equally.

Where at least 50 persons areemployed, the employer must preparean annual report on its equalopportunities policies for the employeerepresentatives (Works Council or, in itsabsence, staff representatives). Thereport reviews the measures taken toachieve equality at work for both menand women and sets objectives for thefollowing year.

Enforcement of the anti-discriminationrules is carried out through the work ofLabour Inspectors who may reportinfringements to the Public Prosecutor.

Civil action may be taken by aggrievedemployees before the IndustrialRelations Courts. Direct criminal actionmay also be taken by employees beforea Police Court.

Sexual harassment and mentalharassment at work is forbidden and thePenal Code imposes penalties forinfringement:

The French Labour Code provides thatmental harassment is a criminal offencein France. This criminal offence issanctioned by a fine of up to EUR.15,000 and/or a maximum one-yearprison sentence, further to anydisciplinary measures taken by theemployer.

The law defines moral harassment as:“Repeated actions of harassment whichhave the aim or the consequence ofdegrading the employee’s conditions ofwork in a way that his rights or dignity,his physical or mental health could bealtered, or his professional perspectivesdamaged.”

Sexual harassment is a criminal offencesanctioned by a fine of up to EUR.3,750 and/or a maximum one-yearprison sentence, further to anydisciplinary measures taken by theemployer.

Damages can also be obtained in Courtfrom the harasser and, possibly, fromthe employer as the latter is now subjectto the obligation to ensure that there isno harassment in his company.


5.1 Freedom of ContractFrench employment law is extensivelyregulated but, where it is not, employersand employees are free to agree theterms they wish. An employee cannot, inadvance, contract out of or waive his orher statutory rights.

The parties to the employmentrelationship are theoretically free tochoose the law which will be applicableto the contract of employment.

However, as a result of Article 6 & 7 ofthe 1980 Rome Agreement (ratified inFrance), a contract of employmentcannot seek to avoid the application oflocal mandatory regulations which aremore favourable to the employee (localprovisions of the place where the workis performed). These mandatoryregulations are listed as follows (this listresults from an interpretation of thecurrent case-law, however they are notlisted by the French Labour Code):

■ Regulations regarding the MinimumWage (“SMIC”),

■ Working Time regulations (notablywork at night and on Sunday),

■ Health and Safety at Workregulations, Occupational medicine,

■ Public Holidays,

■ Paid Holidays,

■ Rules regarding the termination ofthe contract of employment. Forinstance, on termination of theemployment contract, eachemployee is entitled to: a notice

period (except in the case of grossor serious misconduct), accruedpaid holiday rights not yet taken, anda severance indemnity (“indemnitéde licenciement”). Moreover, aspecific termination procedure mustbe complied with (notably apreliminary meeting, and a writtennotice of termination sent byregistered mail after a compulsorycooling-off period).

5.2 FormSince 1 July 1993, as a result of the EUDirective dealing with information to begiven about the contract of employment,employers have to deliver written termsand conditions of employment(description of work, workplace, salary,etc) within the first two months ofemployment. Most sectors of the Frencheconomy are covered by collective-bargaining agreements which usuallyrequire a letter or a contract ofemployment setting out the basic termsof employment. Written contracts arealso required for certain categories ofemployment (for example, fixed-term orpart-time employment).

Employers with 20 or more staff mustdisplay a copy of the internal regulationsrelating to disciplinary rules, (mental andsexual) harassment prevention andhealth and safety requirements.

Fixed-term contracts are strictlyregulated and only permitted in limitedcircumstances such as for the carryingout of specific tasks or to cover for theabsence of a permanent employee. Inmost instances, they may not exceed18 months. If they do, they willautomatically be re-characterised ascontracts for an indefinite period.Except in limited cases, termination givesrise to a liability to make a payment of10 per cent of the total salary paidduring the period of employment.

A new form of contract of employmenthas been created since 2 August 2005:the employment incentive contract(“CNE”). Its conditions of termination aremade easier to encourage smallenterprises, (i.e. employers with lessthan 20 employees) to hire employees.A CNE allows the employer, during thefirst two years of employment, to


65

terminate the contract of employmentsimply by sending a registered letter withacknowledgment of receipt. This letterneed only give a minimum of notice (onemonth for employees with over sixmonths’ service) and there is no need toprovide a reason for dismissal. After twoyears, the CNE is re-characterised as anindefinite term contract. However, thevalidity of the CNE is currently subject tochallenge by the French courts whichconsider it contrary to ILO Conventionn°158 which provides that no workercan be dismissed without the existenceof a legitimate ground for dismissal.

5.3 Trial PeriodsIt is common practice to include aprobationary-period provision in thecontract. Trial periods are usually of threemonths’ duration for executives (cadres)and one or two months for otheremployees. The duration, renewal or non-renewal of the trial period is generallycontrolled by collective-bargainingagreements. During this period, thecontract may be terminated withoutnotice or reason by either party subject tomore favourable provisions in the relevantcollective-bargaining agreement.


An employee owes a duty ofconfidentiality to the employer bothduring and after employment.During employment, there is also a dutynot to engage in competing activities.

Undertakings not to compete after theend of the employment are permittedand enforceable if they are restricted inscope, term and geographical area, donot act to prevent an employee fromcontinuing to earn a living or practice hisor her profession. Non-competitioncovenants must provide for financialcompensation, failing which they are nulland void. If the employee complied withsuch an unlawful clause, he wouldnevertheless be entitled to receive acompensation before the court. Non-competition clauses are fairly commonfor certain types of employees such assalesmen and executives. Excessivenon-competition covenants may be nulland void, but judges can revise suchcovenants in order to enforce them onthe basis of reasonable terms only.

5.5 Intellectual PropertyInventions made by an employee at theemployer’s request in the course of hisor her duties belong to the employer(invention de mission). In certaincircumstances employees are entitled toadditional remuneration for suchinventions. It is very common, especiallyin certain sectors (software, chemicals,etc), to include provisions relating tointellectual property rights in theemployment contract.

6. Pay and Benefits6.1 Basic PayThere is a national minimum salary(SMIC) which is reviewed on 1st Julyeach year by reference to certainindices. With effect from July 2006, thehourly rate is c8.27, i.e. c1,254.28 permonth (for 35 hours per week). Nextchange of rate should occur on July2007.

However, most collective-bargainingagreements further regulate salaries inthe particular sector to which they relate.In practice, the nationally agreed ratesusually act as starting points fornegotiators at the lower bargaininglevels.

The index linking of salaries isprohibited.

6.2 Private PensionsThe French pensions system is fairlycomplex. Ordinary employees benefitfrom two mandatory pension schemes(the social security pension scheme anda mandatory pension scheme calledARRCO) whilst Executives (cadres)benefit from the same pension schemesas ordinary employees in addition toother specific pension scheme (calledAGIRC). All compulsory schemes are“par répartition” (“pay as you go”pension funds).

The use of private pension schemes isbecoming more widespread as the valueof the above compulsory schemes isincreasingly eroded, especially forcadres. Most schemes are insured andbased on defined contributions.

6.3 Incentive SchemesA mandatory profit-sharing scheme(“accord de participation”) must be

concluded in companies andeconomical and social units (“unitéséconomiques et sociales”) employing atleast 50 employees during a six-monthperiod (successive or not) and where theturnover permits the establishment of aspecial profit-sharing reserve (“reservespéciale de participation”).

Discretionary bonus schemes (“accordd’intéressement”) and savings schemes(“plan d’épargne d’entreprise”) areoptional. These schemes have rapidlygrown in importance in recent years.

The amounts paid to employees throughthese schemes are free of social-security contributions within certainlimits. Furthermore, the profit-sharingreserve (of a profit-sharing scheme) isfree of income tax in certaincircumstances.

Despite the existence of a politicalconsensus that greater employeeinvolvement should be encouraged,interest in equity participation has beena fairly recent phenomenon, boostedpartly by the privatisation programme ofthe late 1980’s.

6.4 Fringe BenefitsIt is common practice to provide seniorexecutives with cars and other benefitsin kind. Such fringe benefits areconsidered as normal salary andsubject, as such, to social securitycontributions.

6.5 DeductionsEmployees are responsible for declaringand paying their own income tax. Theemployer is not required to deduct taxat source unless a Court declaresotherwise (usually to recover unpaid tax)or a bilateral tax agreement requires it.The tax year runs from 1 January to31 December.

7. Social Security7.1 CoverageA basic level of benefits is provided bythe state system: old age and survivor’spensions, disability and sicknessbenefits, and family allowances. Inaddition, complementary mandatoryprivate schemes provide for additionalpension, disability and survivors’benefits. These schemes are funded by



66


both employee and employercontributions. Unemployment benefitsare funded by employers and employees(the ASSEDIC scheme). Those who donot qualify for assistance under one ofthese schemes are covered by thenational solidarity scheme, financed bythe state.

7.2 ContributionsBoth employers and employees arerequired to make contributions to thesocial security system and employersmust deduct employees’ contributionsfrom their pay. Contributions to the basicsocial security system amount toapproximately 28 per cent for theemployer and 16 per cent for theemployee. The percentage is based ongross salary with various ceilingsdepending on the type of benefitinsured.

Further contributions to thecomplementary pensions system mustbe paid to the AGIRC fund forexecutives (“cadres”) and to the ARRCOfund for other employees. Minimumcontributions payable vary on the basisof employee category and the level ofsalary: employees’ contributions rangefrom three per cent to eight per cent onaverage; employers’ contributions fromfour per cent to 13 per cent on average.Because there is a fear that the value ofstate pension funds and theAGIRC/ARRCO funds will be unable tomaintain the current level of paymentswithout significantly increasingcontributions, employers tend to pay theminimum payments into state andAGIRC/ARRCO funds and to rely moreon private-sector insurance companypension schemes.

The total amount of contributions to bepaid by the employer is approximately45/50 per cent of gross salary,20/25 per cent for the employees.

8. Hours of WorkWith effect from 1 January 2002, theduration of the working week wasreduced to 35 hours per week for allcompanies. Legal provisions wererecently amended in 2004 in order toincrease the flexibility for employers.

In practice, many companies alreadyreverted to a 39-hour week mechanism,through lump sum agreements whichtake into account the statutory increaseof overtime (indeed, each hourperformed by an employee over35 hours per week is still classified asovertime and paid at an increasedhourly rate).

New provisions regarding overtimeincreased the legal ceiling of overtime to220 hours per year per person, toaccommodate this new flexibility.

In practice, it means that, work inexcess of 220 hours overtime, requiresthe written consent of the labourauthorities.

Overtime rates of pay are an additional25 per cent premium for the first eighthours per week and a 50 per centpremium thereafter.

For companies with up to 20 employees,overtime rates of pay are an additional10 per cent premium for the first fourhours per week, a 25 per cent premiumfor the following four hours, and a50 per cent premium thereafter(these rates should be maintained until31 December 2008).

Employers must comply with legal limitsand ensure that employees do not workin excess of 10 hours per day or48 hours per week or an average of44 hours per week in a period of12 consecutive weeks (although theserestrictions do not apply to employeessubject to lump sum agreements with areference to a specified number of daysof work per year). Authorisation toexceed these limits can in some casesbe obtained from the labour authorities.

Only senior management employees(“Cadres Dirigeants”) are exempt fromthese rules. The definition of thiscategory of employee by French case-law is very narrow (deliberately sincethese employees are excluded frommost of the 35 week provisions):according to the latest case-law, CadresDirigeants are executives who musthave the highest responsibilities withinthe company (i.e. they must benefit fromwide powers of attorney from the

management board), a large degree ofindependence in the organisation of theirwork schedule, and the highestcompensation packages in thecompany.

9. Holidays and Time Off9.1 HolidaysThere is a basic entitlement to fiveweeks’ paid holiday per year. Collective-bargaining agreements or individualemployment contracts may confer rightsto additional holiday.

In addition, there are 10 public holidaysfor which almost all employees get paidby virtue of collective-bargainingagreements.

9.2 Family LeaveA pregnant woman is entitled to up to atotal of 16 weeks’ maternity leave,although this period is extended to26 weeks for the birth of a third child.The absent employee gets up to80.32 per cent of her salary up to a ceilingpaid by a social security institution.In many cases, collective-bargainingagreements require the employer to topthis up to full normal pay.

Three days’ birth paternity leave isgranted and includes entitlement to fullpay.

Eleven days’ paternity leave is granted(18 days in case of multiple births).The employee is not entitled to full pay,unless provided for by a collective-bargaining agreement or this is acommon practice in the company.During this leave, the employee isentitled to social security benefits.

Employees are entitled to three yearsunpaid parental leave.

9.3 IllnessSickness normally has the effect ofsuspending the employment contractand relieves the employer of theobligation to pay the employee.From the eleventh day of absence byreason of sickness, an employee iseligible to receive 90 per cent of his orher normal salary for 30 days andtwo-thirds of it for another 30 days.These periods increase with length ofservice. The cost is borne by the


67

social-security fund. However, mostcollective agreements provide that theemployer is obliged to continue to paythe whole or part of the employee’sremuneration during some of thesickness period. The period varies withthe seniority of the employee.

10. Health and Safety10.1 AccidentsEmployers are obliged to contributetowards a social security fund to maintaininsurance against any liability which mightarise as a result of industrial accidentsand which are not due to the negligenceor gross misconduct of the employer.

The cost of insurance varies accordingto the size of the company and thehistory of industrial accidents in thatparticular undertaking.

10.2 Health and Safety ConsultationA Health and Safety Committee(“Comité d’Hygiène, de Sécurité et desConditions de Travail”) must be set up inall companies employing 50 or moreemployees. This committee isresponsible for ensuring that theemployer complies with health andsafety regulations.

11. Industrial Relations11.1 Trade Unions■ The Labour Code and collective-

bargaining agreements grant theright to negotiate, the right to berepresented by and organised into atrade union and the freedom not tojoin a union. The French trade unionmovement is divided into five mainfederations: Confédération Généraledu Travail (CGT);

■ Force Ouvrière (FO);

■ Confédération FrançaiseDémocratique du Travail (CFDT);

■ Confédération Française deTravailleurs Chrétiens (CFTC); and

■ Confédération Française del’Encadrement-ConfédérationFrançaise des Cadres (CFE-CGC) –mainly cadres unions.

Almost all federations are represented insome form at a national level in

negotiations with the employers’federation (formerly CNPF but recentlynamed “Medef”) and the Government.

11.2 Collective AgreementsAlthough less than ten per cent of theworkforce are members of a tradeunion, around 95 per cent of employeesare covered by some form of collectivebargaining agreement (for the reasonsexplained in the Introduction).

Employers must bargain every year overrates of pay and working hours incompanies where there is at least onetrade union representative (“déléguésyndical”).

11.3 Trade DisputesThe French constitution recognises theright to strike, whereas lock-outs areonly legal in exceptional cases. Picketingis prohibited if non-striking employeesare prevented or deterred from working.Short strikes in industry at factory levelare quite common but statistics showthat the number and length of strikes isdiminishing.


Whenever 11 or more employees areemployed in a company orestablishment, the employer mustorganise elections for staff delegates(“délégués du personnel”).

In any company employing 50 people ormore, the employer must organiseelections for a Works Council (“comitéd’entreprise”).

The unions may appoint a representativein the company and also to the WorksCouncil.

In the event there are no candidates tothe election, the works council or thestaff delegates institution cannot be setup. However, elections must still beorganised every four years.

Where a Works Council exists, theemployer is required to pay a subsidyequal to 0.2 per cent of the payroll billfor the functioning of the Works Council,in addition to one for the organisation ofsocial and cultural activities foremployees.

In the case of companies employing50 employees or more, the WorksCouncil has the right to appointrepresentatives to their management orsupervisory boards and to theshareholders meeting. The number ofrepresentatives will depend on the sizeof the company: they cannot be lessthan two or exceed more than one-thirdof the board membership. Company lawallows for articles of association toprovide employees on the boards ofcompanies with full voting powers.

Companies or groups of companies withat least 1,000 employees in the EU andwith employees in France and at leastone other EU Member State may berequired to establish a European WorksCouncil or a procedure for informing andconsulting employees at European level.

Staff delegates (“délégués dupersonnel”) must be consulted on arange of matters and the employer mustmeet with these representatives at leastonce a month. The principal function ofthe staff delegates is to presentindividual and collective complaints tomanagement.

The Works Council (“comitéd’entreprise”) is a consultative body andmust meet every two months (once amonth in companies with at least150 employees). It must be consulted onboth employment and certain economicmatters. Information on relevant mattersmust be supplied to the Council.

The Works Council must be informedand consulted in particular on:

“Questions relating to the organisation,the management and the generalrunning of the company and in particularon the measures which may affect thevolume or the structure of the staff, theduration of work, the conditions ofengagement and employment and thetraining of the staff. The works council isinformed and consulted on themodifications in the economic or legalorganisation of the company, inparticular in the event of merger, sale,important modification of the productionstructures, as well as on acquiring orselling subsidiaries (meaning held as toat least 50 per cent). The employer must



68


also consult the works council when ittakes a share in a company and informit when it has knowledge of a newshareholding in its company”(Article L.432-1 of the Labour Code).

The Works Council must be consulted inmany different situations includingacquisitions, mergers and collectiveredundancy situations (see furtherbelow).


12.1 GeneralThe Works Council should be consultedin the event of a merger, sale,restructuring of the business or thecompany, or when the company buys orsells a majority shareholding in anothercompany.

French law complies with the EUAcquired Rights Directive: upon abusiness sale, the employmentcontracts are automatically transferredto the transferee on the same terms andconditions. Dismissal is normally onlyallowed in limited circumstances andredundancies are forbidden beforetransfer.


The consultation must take place beforeany decision on the transaction is taken(i.e. sufficiently in advance and, in anyevent, before signing/closing). Both theseller and the buyer of the businessmust inform and consult their respectiveworks councils.

A detailed memorandum of informationon the operation itself and on itsconsequences for the company and thetransferred employees must be preparedand disclosed sufficiently in advance tothe works council, so that is can be in aposition to express a view.

One meeting may be sufficient, but inpractice the works council will betempted to ask for more details andfurther meetings. Therefore, thisconsultation process can take from twoweeks to two months or more and reallydepends on the type of relationship thathas been established betweenmanagement and the works council

members/trade-unions and the riskswhich the employees envisage they maysustain as a consequence of theproposed operation.

Specific works council informationprovisions must also be complied withwhere a company is involved in a“concentration” transaction, with regardto French competition law.

In all these situations the Works Councilmust be consulted in all instances priorto the decision being made, whichmeans that the Works Council mustdeliver a formal vote on the basis ofdetailed (written) information provided bythe employer sufficiently in advance.

12.3 Notification of authoritiesThere is an obligation to notify andobtain the prior authorisation of theLabour Inspection in the event of apartial transfer of a business.

12.4 LiabilitiesFailing to obtain the formal opinion ofthe Works Council when legally requiredto do so is a criminal offence punishableby a fine of up to EUR 3,750 and/or aprison sentence of a maximum of oneyear (the prison sentence is in principle,not applied for a lack of consultation).Liability for the criminal offence falls onthe manager personally (the president ofthe company or his duly appointedrepresentative) and will appear on hiscriminal records in France. It should benoted that criminal liability will arise notonly for failing to consult the workscouncil, but also for going ahead withthe proposals under consultation aftermeeting with the works council if thelatter has not given its view on theproposals. In addition with effect from1st January 2006, the legal entity itselfalso incurs criminal liability for suchconduct.

13. Termination13.1 Individual TerminationThe rules on termination of employmentin France are complex and weightedagainst the employer dismissing anemployee save in exceptionalcircumstances.

Employees must give notice oftermination to their employer in

accordance with the relevant legislation,collective-bargaining agreement orindividual contract.

13.2 NoticeIf the reason for the dismissal (whethereconomic or personal) is not classifiedas relating to gross misconduct (“fautegrave” or “faute lourde”) on the part ofthe employee, the employer must givenotice to the employee before thedismissal takes effect or must pay theemployee compensation in lieu ofnotice.

The notice which must be given willdepend upon the length of service andthe category of employee concerned.

Unless more favourable terms areprovided in the collective-bargainingagreement or in the individual’s contractof employment (which is often the case),the minimum notice is equal to onemonth for an employee with six months’to two years’ service in the samecompany and two months for anemployee with at least two years’service. It is three months for executives.

Additionally, compensation for dismissalor redundancy will be payable to anemployee with more than two years’service unless he or she is beingdismissed for gross misconduct. Thelegal provisions provide for 1/10th of themonthly salary for each year of service,plus 1/15th of the same salary for eachyear of service beyond ten years (theseamounts are doubled in the case of aredundancy). Collective-bargainingagreements or individual contracts oftenprovide for a higher amount ofcompensation.

13.3 Reasons for DismissalThe dismissal of an employee must bebased on real and serious grounds,whether of a personal or economicnature.

The existence of personal reasons fordismissal is a matter of fact to bedecided by the Courts. A strictprocedure must be followed by theemployer, whereby the employee mustbe summoned in writing to discuss thereason for the proposed dismissal.


69

The law lays down detailed rules inrelation to the content of the lettersummoning the employee to interview,the procedure for sending it and whenthe meeting can take place.The employee may be accompaniedby a fellow employee, an employeerepresentative or, in the absence ofrepresentative institutions in thecompany, by a person from outside thebusiness chosen from a list to beobtained at the town hall or the LabourInspectorate. Dismissals must benotified in a letter sent by recordeddelivery not earlier than the third dayfollowing the day of the meeting(different waiting periods apply in thecase of redundancy).

Dismissals on economic grounds arestrictly defined by law and include thereorganisation or restructuring of theemployer’s business or a change in thegeographical location of the businessetc. The law does not lay down anyparticular method of selection, butprovides that the employer must definethe criteria for selection after havingconsulted the staff representatives.The criteria must however take accountof the number of family dependants,seniority, the personal difficulties of theemployee (any physical handicap, forinstance) and the professional abilities ofeach category, subject to any specificprovisions in the applicable collectiveagreement.

Where the dismissal results from seriousor gross misconduct (“faute grave orfaute lourde”), the employer is notrequired to give notice or to pay anycompensation.

Damages are awarded in addition by theCourts in cases where the employer hasfailed to observe the proceduralrequirements or is unable to show thatthere were real and serious grounds(whether of a personal or economicnature) for the termination, or that therewas no serious or fundamental breach.In those circumstances, the Court mayconsider the dismissal to be wrongful(“abusive”). If the company has at least11 employees, the judge must awarddamages to the employee of not lessthan six months’ pay provided theemployee has more than two years’

continuous service. In other instances,the damages will be in accordance withthe employee’s actual loss. It is unusualfor the Courts to grant damages inexcess of 18 months’ salary. The Courtwill also order repayment by theemployer to ASSEDIC (see above) of upto six months’ unemployment benefitreceived by the employee. The Courtsdo not normally order reinstatement ofthe employee save in exceptionalcircumstances. French IndustrialRelations Courts have a ConciliationOffice to promote settlement ofdisputes.

Any termination of the employment of anemployee who is 50 or older and whobecomes unemployed will entail apayment to the unemploymentinsurance fund by the employer of anamount ranging from one month’s to12 months’ salary.

13.4 Special ProtectionSeveral categories of employees, suchas employees incapacitated by reasonof sickness, employees on parentalleave, union delegates, employeerepresentatives on various bodies andWorks Council members, enjoy specialprotection against dismissal.Dismissals of staff representatives willonly be allowed after following a specialprocedure which includes obtaining anofficial authorisation from the LabourInspectorate.

13.5 Closures and Collective DismissalsBusiness closures and collectivedismissals are included in the scope ofdismissals for economic reasons. If morethan one employee is to be dismissedfor “economic reasons”, the rulesrelating to collective dismissals will apply.These rules include consultation with theWorks Council or, in the absence ofsuch a Council, the staff representatives.

When collective dismissals affect ten ormore employees, over a 30-day period,in an undertaking with more than50 employees, the employer has anobligation to prepare a job protectionplan (“Plan de Sauvegarde de l’Emploi”)(formerly called a “Social Plan”) inconsultation with the Works Councilwhich may cover issues such asvoluntary part-time work, professionalappraisal, guidance in seeking

employment and early retirement. If thelabour authorities consider the planunsatisfactory, they may require theemployer to start the procedure again,including consultation and the drafting ofa new plan. In addition, if IndustrialCourt judges consider the planunsatisfactory, they may declare all thedismissals null and void, (which is thetoughest sanction available in Frenchlabour law, except for criminal charges,which may be laid for example for failureto respect staff representativesprerogatives or health and safetyrequirements).

In companies or groups with less than1,000 employees, all employees maderedundant are entitled, to participate in a“Re-employment programme”(“Plan d’Aide au Retour à l’Emploi paranticipation”) during the notice period.

A law dated 18 January 2005 createdan additional mechanism called“Convention de reclassementpersonnalisée” (individualised retrainingagreement) for companies and groupswith less than 1,000 employees.This law has not yet been implemented.

In companies and groups with morethan 1,000 employees, all employeesmade redundant are entitled to leave ofabsence in order to participate in a“Redeployment programme” (“Congé dereclassement”); if an employee refusessuch leave, his employer has to offerhim a Re-employment program.In certain cases, the employer is alsoobliged to consider with local authoritiesthe effects of a collective redundancy onlocal employment, and find anagreement with the local representativeof the State in order to compensate theeffects of the collective closure orredundancy.

14. Data Protection14.1 Employment RecordsThe French law n°78-17 dated6 January 1978 known as “Informatiqueet Libertés” (the 1978 law) governs thecollection, storing, processing and useof personal data in France as well as theinternational transfer of personal datacollected in France. The 1978 Law wasrecently modified by a law dated6 August 2004.



70


Under the 1978 Law, data controllerssuch as employers, must comply with anumber of formalities and declarations ofthe “Commission Nationale del’Informatique et des Libertés” (“CNIL”),an independent governmental agency,prior to collecting data for an automatedpersonal data processing operation.The CNIL then delivers a writtenacknowledgement of receipt.

The new law dated 6 August 2004develops the means of control of theCNIL and particularly the access of itsagents to the premises of companies(refusing the access of the company’spremises to the CNIL agents is acriminal offence sanctioned by animprisonment of up to one year or a fineof up to 15,000 euros).

14.2 Employee Access to DataEmployees, as data subjects, have theright to make an access request. Thedata subject has to prove his identity inorder to be communicated therequested information. No charge maybe levied and the data must becommunicated in clear and intelligiblelanguage and the data subject is entitledto a copy of the requested information.

The data subject may require theemployer to modify, complete, clarify,update or erase the information asappropriate. If the access request isrefused, the data subject has a right tochallenge the employer’s decision beforethe Courts.

14.3 MonitoringIn general, French law does not prohibitor limit the monitoring of employees’ levelof activity at work, but merely requiresprior notice to be given to employees anda prior consultation with the WorksCouncil. Although an employer may, as ageneral principle, monitor the employees’use of Internet and emails, it must at alltimes, comply with the general principleof proportionality (article L.120-2 of theFrench Labour Code).

Every monitoring measure must bejustified by the nature of the businessactivity of the employer’s entity and berespectful of the employees’ rights andliberties, including the right to a privatelife and privacy of correspondence.

French case law indicates (on the basisof the right to a privacy ofcorrespondence) that an employercannot systematically access thecontent of all emails and attacheddocuments of either employeesgenerally or specifically targetedemployees. In any case, the employercannot access emails which appear tobe private.


The notice filed at the CNIL must specifyall destinations for international transfers,and all international transfers require theprior authorisation of the CNIL.Under the 1978 Law, the CNIL mayoppose any international transfer to acountry which does not afford adequatedata protection to its subjects.

The European Commission Decisionsregarding “adequacy” have full effect inFrance, and are recognised by the CNIL.

Infringements of the 1978 Law mayconstitute criminal offences and besanctioned by a fine of to up to300,000 euros and up to five yearsimprisonment.

Under Article 226-24 of the FrenchCriminal Code, organisations may beliable for such breaches. Fines are fivetimes higher for organisations, andspecific sanctions may apply, such as aprohibition from carrying out professionalactivities.

In addition, email correspondence isprotected under certain conditions byadditional provisions of the FrenchCriminal Code. Infringements of theseprovisions may lead to punishment byimprisonment of up to one year or a fineof up to 45,000 euros. Individual datasubjects can also claim damages inrespect of any infringement of his or herof privacy.


71

Germany1. IntroductionAlthough there is no single statutegoverning the individual and collectiveaspects of employment, labour law inGermany is highly regulated andcodified. In practice, terms andconditions of employment as well as thenature of labour/management relationsare moulded primarily by collectivebargaining between trade unions andemployers or collective agreementsbetween works councils and employersand to some extent by custom andtradition. However, employmentcontracts must be negotiated within thestrict confines of labour legislation,regulations and case law. Side by sidewith statutory regulation, a number ofancillary principles have beendeveloped, such as the employee’s dutyof loyalty and the employer’s duty ofcare.

Employee participation in the workplaceis well developed. There are “co-determination” rights conferred on workscouncils, the latter being a significantfactor in areas such as hiring anddismissing employees, health and safetyand HR planning. Collective agreementsare legally binding and a highpercentage of the workforce have someterms and conditions of employmentprovided by collective agreements.Disputes, both collective and individual,are handled by special labour courts.

The Federal Government was and is stilldetermined to work on legal projectswithin the field of labour law. In 2006,the Anti-Discrimination Act (AllgemeinesGleichbehandlungsgesetz, see below 4.)has been implemented. Currently, theintroduction of minimum wages forspecific industries or even foremployment relationships in general isunder discussion. To date there hasbeen no statutory minimum wage, onlyminimum wages established bycollective bargaining agreements whichwere declared binding on the entireindustry sector (allgemeinverbindlich),irrespective of whether the affectedemployers are members of the relevantemployers associations or unions.Such agreements currently apply in the

construction and construction relatedservices industry sectors, the temporaryemployment sector and in the buildingcleaning sector.

Industrial relations themselves continueto be generally good. In some businessareas the practical co-operationbetween the social partners is quiteclose.


2.1 GeneralThe German system of labour lawrecognises various categories ofemployees and has traditionally drawn adistinction between white collar workers(Angestellte) and blue collar workers(Arbeiter). After this general distinctionwas declared unconstitutional severalyears ago, only a few provisionsdifferentiating between the twocategories continue to exist, most ofwhich are in collective bargainingagreements, for example with regard tonotice periods.

2.2 DirectorsCertain protective laws do not apply toboard members or managing directors(Vorstandsmitglied in an AG andGeschäftsführer in a GmbH) and onlypartly to senior executives (LeitendeAngestellte). The distinction betweensenior executives and salariedemployees is in practice often not aneasy one to draw. Senior executives arenot represented by a works council(Betriebsrat), they have a statutory rightto form their own committees(Sprecherausschüsse). Thesecommittees have broadly similar powersto works councils in relation todismissals and redundancies.

2.3 OtherGerman statutory law includes theprinciple that part-time employeesshould receive the same protection asfull-time employees. There must bejustifiable reasons for an employer totreat part-time and full-time employeesdifferently. On engaging a part-timeemployee, the number of working hoursper week should be agreed betweenemployer and employee. If this is notexpressly agreed, ten hours a week willbe implied. In the case of part-time

contracts without general agreement onthe working days and work hours, theemployer must give four days’ notice ofthe work he requires to be done.Furthermore, if the contract does notcontain any provisions with regard to thenumber of working hours per day thenthe employer is obliged to provide atleast three consecutive hours of work aday.

After six months of employment,employees generally have a right todemand a reduction in their workingtime. The employer is obliged to complywith this request unless he can provethe existence of business or operationalreasons justifying an objection to such areduction. Employees are, however, onlyentitled to part-time employment, if thetotal number of employees in thecompany exceeds 15. If part-timeemployees wish to increase theirworking time, employers are obliged tooffer vacant full time posts to these part-time employees first.

Similar provisions apply to employees onparental leave. A parent is entitled topart-time employment (15 to 30 hoursper week) during his/her parental leave,provided that the employmentrelationship has been in existence formore than six months and the totalnumber of employees exceeds 15.The employer may only refuse such arequest, if urgent operational reasonsjustify the refusal.

Marginal employment is deemed to existwhenever the employee earns no morethan c400 per month (regardless of thenumber of hours worked) or wheneverthe duration of the work ischaracteristically limited to two monthsor fifty days per calendar year, unlessthe nature of the work is professionaland the total payment exceeds c400per month (i.e. c4,800 per year). For thepurpose of assessing whether anindividual is engaged in marginalemployment, the payment and durationof several periods of employment mustgenerally be aggregated. Whenever anemployment relationship is classified asmarginal employment, the employer isonly required to make a lump sumcontribution of a total of 30 per cent ofsalary to the social security system

Employment and Benefits in the European UnionGermany


72


(15 per cent for pension, 13 per cent forhealth insurance and further two percent for income tax). Marginalemployment relationships must benotified to the social security authoritiesin the same manner as full-timeemployment relationships.

3. Hiring3.1 RecruitmentEmployers must consult with the workscouncil (where there is one) aboutgeneral personnel planning.In companies with more than20 employees, the employer must, interalia, consult with and obtain the consentof the works council before hiring.Employers with 20 or more employeesmust reserve five per cent of jobs fordisabled employees or pay theauthorities a compensation tax(Ausgleichsabgabe) of between c105and c260 a month for each disabledperson he is obliged to employ. Inaddition to the compensation tax, theemployer may be fined up to c10,000for not fulfilling the quota.

3.2 Work PermitsAs a general rule, all non-EEA nationalswho wish to work in Germany mustapply for a visa before entering Germanyfor the first time. However, there areexceptions, for example the rule is notapplicable to US nationals and nationalsof some other countries. The visa will beissued by German embassies basedoverseas. Once in Germany, all non-EEAnationals have to apply for a residencyand work permit (Aufenthaltstitel) withthe locally competent public offices foraliens (Ausländerbehörden). Afterobtaining the approval of the competentFederal Employment Office(Bundesagentur für Arbeit), the publicoffice for aliens will convert the visa andissue the residency permit.The residency permit amounts inessence to a work permit, as theauthority to work is explicitly stated inthe residency permit.

The residency permit may only beissued if a concrete job offer exists, theemployment does not result in anyadverse consequences for the labourmarket, no German workers areavailable for the type of employment andfilling the vacancies with foreign

applicants is justifiable in terms of labourmarket policy and integration issues.The employer is required to furnish thelocally competent employment office(which will in turn pass this informationto the public office for aliens) withinformation on pay, working hours andother terms and conditions ofemployment.

EEA nationals, as a rule, benefit from therules granting freedom of movement andlabour mobility. They no longer need toapply for a residency and work permitwith the public office for aliens but needonly obtain a confirmation of registrationfrom the local public and administrationoffice (Meldebehörde).

Under the provisions of the so-called2+3+2-regulation, employees from the12 new member states of the EuropeanUnion who joined the European Unionon 1 May 2004 and on 1 January 2007respectively, except Malta and Cyprus,still need a residency and work permit inorder to work in Germany. Originallyimposed for a transitional period of twoyears (until 30 April 2006), theserestrictions have recently been extendedfor three further years (until 30 April2009). If necessary Germany can extendthis period by a further two years, until30 April 2011.

4. DiscriminationThe Anti-Discrimination Act (AllgemeinesGleichbehandlungsgesetz) transposedinto German national law several EUdirectives dealing with anti-discriminationregulations on 18 August 2006. Itconsiderably expands employees’protection against discrimination.

The Anti-Discrimination Act protectsemployees, job applicants and formeremployees, including pensioners,against discrimination by the employer,other employees and third parties, suchas customers or service providers of theemployer. It expressly prohibitsdiscrimination on the grounds of race,ethnic origin, gender, religion or belief,disability, age or sexual identity. TheAnti-Discrimination Act containsprovisions specifying which activitiesconstitute a violation of the law, whatcriteria might be applied in determining aviolation and the obligations pertaining

to the employer in this context. Theemployer is obliged to take appropriatemeasures to protect his employeesagainst discrimination and harassment,for example by informing his staff of thenew anti-discrimination legislation, byappointing competent persons within hisorganisation where complaints can befiled, by undertaking precautionarymeasures where necessary and carefullydocumenting potential discriminationcases, but also by admonishing or evendismissing employees who discriminateagainst others. The most significantchange from the previous legal situationis the introduction of significant anduncapped sanctions, together with areversal of the burden of proof, whichputs the onus on the employer todemonstrate that the act complained ofwas not motivated by discriminatoryreasons. As the Anti-Discrimination Actdoes not clarify what intensity certainacts must have in order to constitutediscrimination or harassment under thelaw, it is to be expected that in the yearsto come, the interpretation of the law willbe the object of disputes and in theirwake, court decisions will provide moreconcrete criteria to help interpret thelaw.

The Anti-Discrimination Act alsocontains a number of exceptionsjustifying differentiations made on thebasis of criteria normally constitutingdiscrimination. For example,discrimination on the grounds of gendercan be justified if the gender is anindispensable prerequisite for the activityto be performed, or, discrimination onthe basis of age might be permitted ifthere are objective reasons for it and alegitimate purpose such as anunderlying aim of integration of youngpersons, older persons and personswith obligations towards dependentsinto the job market.

In the event of alleged discriminatoryactivities, the employee will in the futureonly have to substantiate circumstances,which raise a presumption ofdiscrimination. Thereafter, the employerbears the burden of proof ofdemonstrating that either there existedno discriminatory treatment or it wasjustified in accordance with the Anti-Discrimination Act. Discriminatory


73

measures will be void and mightadditionally lead to a claim for damages.The new Anti-Discrimination Actdistinguishes between compensation forfinancial loss and for non-materialdamages; liability for non-materialdamages being independent of theexistence of fault or even negligence onthe part of the employer. It has becomea controversial subject of discussion inGermany whether a significant new riskof liability will be introduced into theGerman legal system by virtue of thefact that for the first time the concept ofpunitive damages without financial limitsmight be applied by German courts.

According to the Anti-Discrimination Act,not only discrimination by the employerand representatives of the employer maytrigger the employer’s liability, but alsothe activities of third parties, namelycustomers or service providers of theemployer.

Any claim for compensation for damagemust be asserted in writing within twomonths of the claim coming intoexistence and, unless acknowledged bythe employer, court proceedings mustbe instituted within three months ofmaking the written assertion.

Employers are well advised to carefullyreview their existing internal procedures,model employment agreements as wellas applicable collective agreements forcompliance with the new Anti-Discrimination Act. It is also veryimportant to ensure that managers withpersonnel responsibilities receivecomprehensive training in relation to thenew legal requirements as well as beingmade aware of the consequences ofviolating them. Where the employer candemonstrate that it provided managerswith appropriate training this will help theemployer defend any claim broughtunder the Anti-Discrimination Act.


5.1 Freedom of ContractAlthough employer and employee are, inprinciple, free to set the terms of theirrelationship, this freedom is, in practice,limited by mandatory minimum statutorystandards. In addition, industry-widecollective bargaining agreements

between unions and employersassociations or directly with theemploying companies are common.In addition such agreements aresometimes declared generally binding inrelation to certain industries or trades(allgemeinverbindlich) and can thereforebe legally binding on employers who arenot even directly party to theagreements and thus risk being unawareof the agreement’s provisions.

5.2 FormEmployment contracts should be inwriting and an employer is obliged tonotify an employee in writing of theessential conditions of his or heremployment within one month of thestart of the employment in order toguarantee legal clarity and make itpossible for the employee to know his orher rights. Non-fulfilment of thisobligation does not render theemployment contract invalid. However,if conditions of the employmentrelationship are subject to litigation andthe employer has not documented thecontractual rights and duties in theabove stated way, the burden of prooffor disputed facts favourable to theemployer may lie on the employer.

Fixed-term contracts are subject to thePart-Time and Fixed-Term EmploymentAct (Gesetz über Teilzeitarbeit undbefristete Arbeitsverträge). This Actsubstantially restricts the options of theemployer to enter into fixed-termcontracts. Generally, fixed-termcontracts can be concluded withoutjustification only for a term of up to twoyears and provided only that noemployment relationship had existedwith the same employer (whether undera fixed-term or indefinite contract) at anytime in the past. Within this two yearperiod, employers are allowed to extendfixed-term employment contracts up tothree times. As an exception to this rule,during the first four years after theestablishment of a new company (butnot in the case of a merger ortransformation of pre-existingcompanies), it is possible to concludefixed-term employment contracts for aperiod of up to four years. In all othercases, there must be a valid reason tojustify the agreement being for a fixedterm. Justification for a fixed-term

contract includes, for example, thereplacement of an employee onmaternity leave. Recently, the EuropeanCourt of Justice ruled that Germanlegislation that allows fixed-termcontracts in excess of two years to beconcluded with employees who areolder than 52 without specificjustification contravenes European law.There are plans to amend the legislationin order to make it compliant withEuropean law, but it is not yet clear inwhich way this will be achieved. Fixed-term contracts must be in writing and besigned by both parties before thebeginning of the employment. Fixed-term contracts that do not fulfil the legalrequirements outlined above will not berendered invalid but will instead beclassified as contracts for an indefiniteperiod.

The law provides that an employee isobliged to register with an employmentagency and to seek new employmentno later than three months prior to thetermination of the fixed-term contractand requires an employer to inform theemployee of this obligation. Accordinglya fixed-term contract should refer to theemployee’s obligation to present himselfpersonally to the employment agenciesin due time.

5.3 Trial PeriodsProbationary periods are common andmaximum periods are often regulated bycollective bargaining agreements; theyare usually up to four weeks for bluecollar workers and three to six monthsfor white collar workers. Probationaryperiods cannot, in principle, exceed sixmonths and must, in any event, bereasonable.

The minimum notice period during suchprobationary period is shorter thanusual, i.e. two weeks (or even less underapplicable collective bargainingagreements). This notice period can,under very limited circumstances, beprolonged by agreement and thereforelead to a de facto extension of theprobationary period.


In principle, employees are subject to astatutory duty not to compete during the



74


course of employment. Employees whoare not covered by this statutoryprovision are subject to a general duty ofloyalty.

Post-termination restrictions oncompeting activities, on the other hand,must be agreed in writing, must providefor certain minimum payments to bemade (essentially 50 per cent of theremuneration formerly receivedthroughout the period of the restriction)and must be for a reasonable period(not exceeding two years). However, it isworth noting that the non-competitionrules in respect of a managing directoror a member of a board of directors(Geschäftsführer and Vorstände) are tosome extent different and less restrictive.

The employees’ general duty of loyaltyextends to the prevention of disclosureof trade and business secrets duringtheir employment. Disclosure of suchinformation after termination can also beprevented provided this is expresslyagreed with the employee. It is possiblethat disclosure or use of certain trade orbusiness secrets may constitute acriminal offence under unfair competitionlaws.

5.5 Intellectual PropertyInventions made by an employee duringthe course of employment and infulfilment of the employee’s contractualduties are governed by the Act onEmployee Inventions(Arbeitnehmererfindungsgesetz) and canbe acquired by the employer by way ofdeclaration, subject to the employerpaying statutory compensation. Onceacquired, the employer can in principleuse it without further remuneration beingrequired. There is no specific legislationaddressing the issue of copyright anddesign patents in the employmentcontext.

The German Copyright Act(Urheberrechtsgesetz) is based on thegeneral principle that the employeeautomatically grants all user rights to theemployer whenever the work has beencreated in fulfilment of contractualduties. With regard to the creation ofsoftware as part of the contractualobligation, the employer is entitled touse the copyright exclusively, unless

otherwise agreed. The use of thecopyright is in these cases covered bythe employee’s wages. Whereemployers expect employees to makeinventions or to create intellectualproperty it is nevertheless advisable toconclude appropriate agreementscovering these matters.

6. Pay and Benefits6.1 Basic PayThere is currently no statutory minimumwage, but the introduction of a minimumwage for specific industry sectors oreven in general is under discussion. Inany event, collective agreementscurrently include minimum wageprovisions for various categories ofemployees. These are legallyenforceable if the collective agreement isapplicable, either because:

■ employer and employee aremembers of the parties to thecollective agreement (i.e. theemployer’s association and the tradeunion respectively); or

■ the collective agreement in questionhas been declared generally binding(allgemeinverbindlich) by the FederalMinister of Economics and Labour;or

■ the employer and the employeeagree individually that the collectiveagreement or parts thereof areapplicable.

Therefore, even where a company is notcovered by a collective agreement, itswage rates are often influenced bycollectively agreed rates.

Annual salary is usually divided into 12monthly instalments. In addition, a 13th(and sometimes 14th) month’s salary isoften paid as a Christmas or holidaybonus.

There is no obligation to index link pay.However, a similar effect is oftenachieved by the annual re-negotiation ofwages within the framework of collectivebargaining agreements.

6.2 Private PensionsMany employers, especially largecompanies, provide company pension

arrangements. Pensions legislationprovides that employees are entitled todemand a company pension from theiremployer by way of conversion of theirremuneration (currently up to an amountof c2,520 per year in the old FRG statesand c2,184 per year in the states of theformer GDR) into pension contributions.The amount equals four per cent of theincome threshold for social securitycontributions and changes annually.The employee has a right to demand acompany pension in the form of a directinsurance policy that will mature and payout upon retirement, unless the employerwants to execute the company pensionby way of a pension fund. In additionemployers are in practice often obligedto provide company pension plansbecause of the terms of a collectiveagreement or simply to attract sufficientlabour. Most schemes are non-contributory for employees and theirqualifying periods of service to getvested rights can be fairly long (if thepension promise was made prior to31 December 2000, as a rule, 10 years;if the pension promise was made after1 January 2001, five years).

Pension promises made on or after1 January 2005 by way of a directinsurance or pension fund must betransferred to a new employer at the(former) employee’s request (introducinga so-called principle of portability,Portabilität). This requires the formeremployer to pay to the new employer asum equal to the actuarial value of thepension at the date of termination ofemployment (up to a maximum amountof c63,000 in 2007) thus resulting in adrain of liquidity at the former employer’spension or insurance fund.

6.3 Incentive SchemesProfit-related pay is often paid tomanagerial and increasingly also to non-managerial staff. Employers are incertain circumstances legally obliged toset up a savings plan for employees andcollective agreements often also requirethe employer to make a contribution.Equity Award Plans are often applied,usually in international group companies.It is worth noting that their introductionas well as operation might be subject toGerman laws and should be alignedwith them.


75

6.4 Fringe BenefitsFringe benefits vary according to thesize of the business and may includebonuses, company cars (for more senioror frequently travelling employees), lifeand/or accident insurance, subsidisedcanteen or luncheon vouchers.If benefits such as Christmas bonuses,vacation pay or company cars areprovided under a collective bargainingagreement or individual contracts,employees are likely to have a right tothem as part of their remunerationpackage unless expressly statedotherwise.

6.5 DeductionsEmployee’s income tax (Lohnsteuer) isdeducted by the employer at sourceand then accounted for to the taxauthorities. The top income tax rate hasin recent years been reduced to 42 percent and applies to an annual income ofc52,152 or more for single employeesand c104,304 or more for marriedcouples. The basic tax rate is 15 percent and applies to income exceedingc7,664 for single employees/c15,328 formarried couples. In 2007 a top incometax rate of 45 per cent has beenintroduced for an annual income ofc250,000 or more for single employeesand c500,000 for married couples (theso called “rich people deduction”).Another deduction, introduced in 1992to pay for the re-unification programme,is the “solidarity surcharge”. Since 1998it has been set at five and a half percent of the income tax rate. Church taxwill also be deducted by the employer ifthe employee is a member of a taxraising church.

7. Social Security7.1 CoverageThe State social security systemprovides benefits in the case of old age,disability, death, sickness, maternity,industrial injury, unemployment andwhere there is a need for nursing care.

7.2 ContributionsThe social security system is financed byemployee and employer contributions,which are based on the employee’ssalary up to various ceilings. As a rule,employers and employees share thecontributions equally.

Employees without children pay anincreased percentage for the nursingcare insurance (of 1.1 per cent ratherthan 0.85 per cent) and all employeespay in to the health insurance fund anadditional amount of 0.9 per cent oftheir salary up to the ceiling amount.

A reform of the health insurance systemwas introduced in 2007 and will bringsome significant changes. From1 January 2009, respectively 1 April 2007for all persons who fall under the scopeof the public health insurance system,every citizen of Germany will be obligedto contract for health insurance cover.In the past, only employees earningabove a specific threshold amount wereable to opt out of the public healthinsurance system and take out privatehealth insurance. From 1 January 2009on, private health insurance will beavailable to all citizens (i.e. including allemployees irrespective of their income).Private health insurance companies willbe legally obliged to offer insurance for abasic premium not exceeding thepremiums of the public health insurancesystem. Private health insurancecompanies will also be required toprovide cover for any citizen who wantsit; without the ability to exclude high riskindividuals or to charge higher premiumsin relation to higher risk individuals.

Self-employed persons are as a rule notmembers of the social security system(comprising unemployment insurance,public health insurance, retirementinsurance, nursing care insurance), butthe qualifying requirements for self-employed status are very strict.Furthermore, certain groups of self-employed persons are subject tomandatory membership of the socialsecurity system for old age pensioninsurance.

For the year 2007, the rates are:

Employers (alone) must also contributeto the insurance for accidents at work,the contribution varies according to thespecific risk of the business concerned;the average contribution amounts to1.31 per cent of the total grossremuneration, but may be significantlyhigher in accident prone industries(e.g. construction industry etc.).

8. Hours of WorkThe number of working hours per weekis usually regulated in a collectivebargaining agreement or, if there is nocollective bargaining agreement, will beregulated in the individual contract ofemployment.

Working time is restricted by statute to amaximum of eight hours per day onaverage, including Saturdays, whichcan, in certain circumstances, beincreased to 10 hours per day. There isa general ban on Sunday and bankholiday working, except in certain tradeslike hotels or restaurants or for certainpublic businesses, like hospitals.Extensions of normal working hoursexceeding these limits may be providedfor in collective agreements, that is the10 hour per day limit can be increased,provided the working time comprisessignificant periods of standby-time.Otherwise, extensions may only becarried out in exceptional circumstanceswith the approval of the appropriatelabour authority. Shop opening hoursused to be strictly regulated, but havebeen significantly extended and in someregions completely abolished.

Under most collective bargainingagreements the average working weekis about 37.7 hours over a five dayweek. The trend towards a 35 hourweek in the 1990s has started toreverse particularly in the past year.In many industries and companies



76

Percentage of the Limit for Basis ofAggregate Amount Assessment per month

West-Germany East-Germany

Retirement Benefit Charge 19.9% c5,250 c4,550

Unemployment Insurance 4.2% c5,250 c4,550(Employment Promotion) Charge

Public Health Insurance Charge approx 14.25% c3,562.50(depending on offers of respective funds)

Nursing Care 1.7% c3,562.50


employees now can work 40 hourweeks again.

Hours worked in excess of thecontractually agreed hours of work areconsidered overtime. Overtime willfrequently be covered by collectiveagreements and often has to be paid ata premium rate. Where this is not thecase, and even though this is not legallyrequired, the payment of premium ratesis also often stipulated in individualemployment contracts. In line with thetrend towards longer working hours,many collective agreements provide forflexible working time with the possibilityof periods of time off as compensationfor accumulated overtime in order toreduce the necessity to pay premiumrates for overtime hours worked.

9. Holidays and Time Off9.1 HolidaysThere are between nine and 13 publicholidays per year depending on theState (Land) in question. Statuteprovides for a minimum of four weeks’paid holiday per year (24 days countingSaturdays as working days), butfrequently collective agreements willincrease this to five or even six weeks .For senior workers and salariedemployees, 25-30 days’ (not countingSaturdays as working days) holiday peryear is regarded as standard.

9.2 Family LeavePregnant women are entitled to takematernity leave from six weeks prior toconfinement. They are entitled to a furthereight weeks after the birth (in some cases12 weeks). Throughout the maternityleave they will receive payment of up to amaximum c13/day from the healthinsurance fund while the employer has topay the difference between the woman’sregular net pay and the daily healthinsurance fund benefit. The amountreceived from the health insurance fundwill be dictated by the employee’s formerincome. Under the Act for compensationof employer’s expenses (Gesetz über denAusgleich von Arbeitgeberaufwendungen)introduced in 2006, all employers cannow apply for reimbursement of thematernity pay the employer has paid tothe pregnant employee and of theemployer’s share of the contributions paidto the social security system.

After the end of the maternity leaveperiod, either parent has a right to claimadditional parental leave for a period upto three years after the child’s birth forthe purpose of rearing the child. Duringthis absence no payments have to bemade by the employer (unless otherwiseagreed in any applicable individual orcollective agreements), however, he hasto make the employee’s positionavailable for the employee upon her orhis return to work or to allow them toreturn to a suitable new position.

In order to encourage parents to takeadvantage of this provision, the Act onpayment during parental leave(Bundeselterngeldgesetz), which appliesto all children born on or after 1 January2007, entitles either parent to a monthlypayment of 67 per cent of the formerregular net pay, up to a maximum ofc1,800 per month, if the child is rearedby the parent and the parent does notwork more than 30 hours a week.This amount will be paid monthly for amaximum period of 14 months. Theparents are free to choose how to splitthis time between themselves subject toa maximum of 12 months being takenby one parent. The other two monthsbeing reserved for the other parent.

There are in addition various statutoryprovisions protecting pregnant womenand new mothers/fathers in their dailywork and from dismissal.

9.3 IllnessEmployers must pay 100 per cent of theemployee’s normal salary for six weeksduring any single period of ill-healthabsence. If the employee returns towork and has a subsequent period of ill-health absence the employee is againentitled to receive up to six weeks’ fullpay. Separate periods of ill-healthpayments are not aggregated.In businesses with not more than30 employees the health insurance fundwill reimburse the employer, in general,80 per cent of the employee’s insuredearnings for this period. After thatperiod, a reduced benefit is provided bythe local social security fund.

10. Health and Safety10.1 AccidentsEmployers must provide insurance for

accidents at work (see 7.2 above).The amount that can be claimed in thecase of accident will depend on the levelof cover actually provided. There aredetailed requirements as to health andsafety at work and the State BusinessSupervisory Authority(Gewerbeaufsichtsamt) may imposeadditional requirements if theundertaking is changed or expandedsignificantly.

10.2 Health and Safety ConsultationWorks councils have rights ofinspection, co-determination and toreceive information concerning healthand safety in the workplace. In addition,certain workplaces are obliged bystatute to set up Health and SafetyCommittees, which must meet everythree months to consider health andsafety matters. Employers may also beobliged to employ (either full time orpart-time) a “safety specialist”,depending on the nature and size of thebusiness.

11. Industrial Relations11.1 Trade UnionsThe right to freedom of association andthe right to engage in union activity onan employer’s premises areconstitutionally guaranteed. An employermust permit union officials todisseminate information and recruit newmembers on company premises duringnon-working hours if the union alreadyrepresents members of the workforce.

Under the Constitution, employeescannot be compelled to join a tradeunion and closed shop agreements areprohibited. Trade unions must meetcertain criteria of independence and besufficiently representative in order to beable to conclude collective agreements.

Most trade unions belong to one of thenational federations:

■ DGB (DeutscherGewerkschaftsbund) – the largestwith the most affiliates

■ DBB (Deutscher Beamtenbund) – forpublic sector unions

Employers are generally affiliated to thenational employers’ associations, the


77

Federal Organisation of Employers’Associations (BDA orBundesvereinigung der deutschenArbeitgeberverbände).

11.2 Collective AgreementsCollective agreements may beconcluded between unions on one sideand individual employers or employers’associations on the other side. They areusually entered into for particularindustries or branches of industries(for example the chemical industry).They may be at local, regional, State orFederal level. They must be in writingand are usually negotiated annually orsemi-annually with regard to salary butare applicable for a longer period if theydeal with matters such as, for example,health and safety, working hours andholidays.

The agreements are generally legallyenforceable between the parties,provided they are in writing and signedby the authorised representatives.There is a central register of collectiveagreements and the parties to acollective agreement are obliged tonotify the Federal Minister of Labour andSocial Welfare (Bundesministerium fürArbeit und Soziales) of the entry intoforce of such an agreement and anyamendment made to it.

11.3 Trade DisputesThe freedom to strike is a basic rightgranted to trade unions and such actionwill be lawful provided it is supported bya union, has work-related objectives(as opposed to political ones) and is theresult of a serious breakdown in thenegotiation process. During a strike,striking employees are not entitled toreceive pay. Provided the strike is notillegal, the employer cannot dismissstriking employees but may in limitedcircumstances lock-out and suspendstriking as well as non-strikingemployees from working.


One of the most important principles inGerman industrial relations law is that of“co-determination”. This concept cangive employees the right to be involvedin decision making at various levels andto various degrees. Thus co-

determination can occur at board levelor at shop floor level.

Depending on the circumstances,employees and their representativesmay be entitled, in connection withparticular matters, to:

■ receive information from theemployer;

■ put forward ideas of their own andbe consulted; and

■ approve or review decisions.

Where a company is required to form asupervisory board – Aufsichtsrat (broadlyspeaking, if the company is either an AGor a GmbH and employs more than500 people) – to oversee managementdecisions, employees have the right toelect a third of the members to thisboard (or half, if the company or incertain cases group of companies, hasmore than 2,000 employees).

In establishments with more than fiveregular employees, a works council canbe elected at the free discretion of thework force. Works councils haveextensive rights to information,consultation and/or even mandatory co-determination in respect of mostorganisational matters. In particular, incompanies with more than 20employees in Germany, works councilshave a mandatory co-determination rightwith regard to any measures whichmight cause redundancies or othersignificant changes to the company’sstructure or its operations and mighttrigger significant (potential)disadvantages for the workforce inGermany. In companies with more than20 employees in Germany, workscouncils also have the right to beconsulted on decisions regardingindividual personnel matters (such as thetransfer or recruitment of an employee,dismissals and redundancies) and somegeneral personnel matters (such asselection criteria or evaluationprinciples). The works council shouldmeet at least once a month with theemployer.

Actions taken by the employer violatingthe works council’s rights may be legally

invalid and can be punished byimposing fines on the employer for eachincident of violation.

Where the works council and theemployer are in dispute on a matter onwhich the works council has a right ofco-determination, both parties canrequire a conciliation committee(Einigungsstelle) to be established inorder to resolve the issue.

An Economic Committee is created on acompany wide level in companiesregularly employing more than100 employees and is elected by theworks council(s). Its function is toregularly discuss the economic affairs ofthe business with the employer.


12.1 GeneralThe rights of employees and employeerepresentative bodies in the context ofacquisition and merger situations differdepending on whether the transaction isdone by way of a share purchase or anasset purchase (share deal – asset deal)respectively.

A share deal raises only limited legalissues since the legal identity of thetarget company as employer does notchange upon the acquisition of sharesand the purchaser acquires the entity asis. In particular, a share deal is notsubject to the provisions regulating thetransfer of an undertaking.

In general, a share deal does not, assuch, directly affect existing employeerepresentative bodies such as workscouncils nor the constitution of thesupervisory board, if any. Nevertheless,co-determination laws are dictated bythe number of regular employees withthe consequence that following anacquisition or merger, different rules mayapply and changes to the co-determination arrangements maybecome necessary. This consequencemust be borne in mind where thetransaction could lead to the overallnumber of employees being increasedbeyond the threshold number triggeringthe obligation to form a supervisoryboard for the first time or to createadditional representation rights and



78


consequently transaction structures areoften influenced by employment lawrelated considerations.

Upon the sale of the business, or part ofthe business, all existing employmentrelationships, including those withexecutives but excluding servicecontracts with organs of the company(e.g. board members), are automaticallytransferred to the new owner and all therights and liabilities of the employmentrelationship continue to exist unchangedvis-à-vis the new employer.The purchaser is also liable for pensioncommitments made to the employee.


In the context of a share deal there is nolegal obligation to inform employees ofthe transfer of shares of their employerbefore or after the transfer, although thisis usually advisable for practical reasons.However, the economic committee mustbe informed in a timely andcomprehensive manner of the resultingeffects of the share transfer on thepersonnel provided no trade or businesssecrets would be jeopardised by doingso.

It is a somewhat grey area as to whenthe information must be provided. Theeconomic committee has to be informedat a time when it is still possible for it toexamine the matter and pass on theinformation to the works councils.It should also be in a position to holdmeaningful discussions with thecompany’s management before finaldecisions are taken. The informationmust be comprehensive, and at itsrequest, the economic committee musthave the same information placed at itsdisposal as the employer has.The information must be provided in anunderstandable form, and context andunknown terms should be explained. Inaddition, the economic committee mustbe allowed to inspect the existing files(except documents containing businesssecrets). The information is deemed tohave been given late if decisions by thecompetent management bodies havealready been finalised, e.g. after theshares have been transferred.The economic committee is not howeverentitled to block the share deal even if

the information has been provided late.Failing to involve the economiccommittee on time is an administrativeoffence. In the event of a serious offence(for example failing to inform, in spite ofbeing requested to do so), legalproceedings may be instituted againstthe employer for breach of its statutoryduties, as a result of which the employercan be ordered to refrain fromcommitting illegal acts (such as notinforming as and when due) or berequired to perform specific acts and thecourt may order administrative fines inthe event of repeated violations.The maximum level of fine is c10,000per ’case’ however there is some legaldebate as to whether each individualemployee is a separate case or whetherall the affected employees togetherconstitute a single case.

It is a matter of debate whether or notthe works council(s) of the targetcompany must be informed at all beforea share deal is carried out. If aneconomic committee exists, it will informthe works council after having beeninformed itself. Even if no economiccommittee exists, the company should,if possible, inform its works council, atleast for practical reasons.

There is no legal obligation to informtrade unions prior to or after a sharesale. In many larger companies tradeunion representatives hold one or moreseats on the supervisory board asrepresentatives of the employees, andthey will thus be fully informed throughthis office.

Whenever a transaction (share deal orasset deal alike) will lead to a significantchange in the organisation of thebusiness, including any split or mergerof businesses, the works council mustbe informed by the seller or buyerdepending on the specificcircumstances, comprehensively and ingood time, of any intended changeswith regard to the company’s structureor its operations and of any potentialsignificant disadvantages for thecompany’s workforce as a whole or inpart. Depending on the circumstances,the employer may be obliged tonegotiate with the works council areconciliation of interests plan

(Interessenausgleich) and set up a socialplan (Sozialplan). (See further below).

In the event that a business is sold by atransfer of all or the essential tangibleand/or intangible economic assets, thesale of the business is subject to section613a German Civil Code, whichtransposes the Acquired RightsDirective.

The transferor (i.e. the former employer)or the transferee (i.e. the new employer)must inform all employees affected bythe transfer, in advance, of the date orproposed date of the transfer, of thereason for the transfer, the legal,economic and social implications of thetransfer for the employees, and of anymeasures envisaged in relation to theemployees. Every employee may objectin writing to the transfer of theemployment relationship within onemonth of receipt of the information.The objection may be declared vis-à-visthe old employer or the new employer.

In recent decisions, the Federal LabourCourt (BAG) has clarified the scope ofan employer’s information obligationsand the consequences of supplyinginsufficient information. The court hasruled that the employer is to provide theemployees with the factual informationthey need to decide whether to objectto the transfer or not. Although the courtaccepted that the information may beprovided by way of a standard letter, ithas also held that employees must beinformed of any particular issues relatingto their employment relationships(e.g. where the consequences of thetransfer differ to those generallyapplicable because an employee orgroup of employees has differentcontractual provisions following aprevious transfer). In addition, theinformation must not only be sufficientlydetailed and legally correct, but, at thesame time, comprehensible for a personwho has no legal education.

If an employer fails to provideinformation which meets theserequirements the one month periodduring which the employee is legallypermitted to object to the transfer of hisor her employment contract to the newemployer does not begin until the


79

employee is sufficiently informed.Consequently, employees may object toa transfer months (the courts recentlyruled on a situation where an objectionhad been declared by a group ofemployees more than nine months afterthe transfer had taken place) or evenyears after a transfer has taken place.An employee can therefore object to hisor her transfer retrospectively with theconsequence that the employmentrelationship between the formeremployer and the employee is deemedto have continued notwithstanding thefact that the undertaking has transferred.The potential risks for the transferor aresignificant and not to beunderestimated. In particular inscenarios where the new owner of abusiness is in an insolvency situation,even contractually agreed warranties orguarantees will not constitute adequatemeans of safeguarding the transferoragainst claims being raised by formeremployees who have retrospectivelyobjected to the transfer (including claimsfor remuneration, continuedemployment, pensions etc.).

The obligation to inform employeesexists irrespective of whether or notemployee representatives, (i.e. aneconomic committee or workscouncil(s)) exist who are also informedabout the transfer and related details. Inpractice, employers therefore facecumulative information obligations vis-à-vis employees on the one hand andemployee representatives on the otherhand.

In the context of an asset deal theEconomic Committee must also begiven the same information as it isentitled to receive in the context of ashare deal (see above).

12.3 Notification of AuthoritiesThere is generally no obligation to notifythe authorities of a business transfer.

12.4 LiabilitiesAlthough the works council has no vetoright regarding the acquisition or thedisposal itself, its procedural right ofconsultation in relation to redundanciesand other significant changes can leadto injunction proceedings in Courtinstituted by the works council and can

thus delay a transfer in Germany untilthe legal obligations have been compliedwith if an agreement is not reached.

Violations of the co-determination rightsof the works council represent anadministrative offence. In the event of aserious offence, legal proceedings maybe instituted against the employer forbreach of statutory duties. In theseproceedings the employer can beordered to refrain from committing illegalacts or be ordered to perform specificacts and the court may order that in theevent of repeated violationsadministrative fines of up to c10,000may be imposed per case.

13. Termination13.1 Individual TerminationThe rules in relation to termination arecomplex and an employer must ensureit complies with applicable contractual,legislative and/or collective agreementprovisions in relation to termination.

13.2 NoticeExcept where there is grossmisconduct, the employer must complywith the applicable notice requirements.These may be found in a collectivebargaining agreement, contract ofemployment and in applicablelegislation. Minimum notice periodsprovided by law (which may be variedby collective bargaining agreements) areas follows:

■ in the first two years of employment,four weeks (to the 15th of the monthor end of the calendar month);

■ for employment between two and20 years, notice is on a sliding scalefrom one to seven months (to theend of the calendar month).

Termination is not hindered by theemployee being ill or absent from work.

Notice of termination has to be given inwritten form to be effective. The writtenform prescribed is only satisfied if thedocuments are personally signed by theparties, which means that noticestransmitted by fax or e-mail do notsatisfy this legal requirement.

The termination letter must be signed by

the legal representative (e.g. theGeschäftsführer of a GmbH or amember of the board of directors of anAG) of the employing entity (either aloneor if he or she is not authorised torepresent the company alone, togetherwith another legal representative) or bythe formally appointed head ofpersonnel. If any other person is to givethe termination notice, this person mustsubmit at the same time and togetherwith the termination letter a writtenpower of attorney in the original, signedby a legal representative of theemploying entity duly authorising him orher to give the termination notice.The termination letter does not have to,and should as a rule not, refer to thereason(s) for the termination.

An employee is obliged to register as awork seeker with the competent localemployment agency as early as possibleafter termination, failing which he or sherisks loosing some entitlement tounemployment benefits. Accordingly thenotice of termination should refer to theemployee’s obligation to present himselfpersonally to the employment agenciesimmediately after receiving the notice.

Each potential dismissal, whether withor without notice, must be notified to theworks council (if any exists) before it canbe implemented. The notification mustidentify the employee concerned anddescribe the reason(s) for the dismissal.The works council then has one weekwithin which it can notify the employerif it wishes to challenge the dismissal.Even if the works council does not agreewith the dismissal, the employer canproceed to give the employee notice.

The employee may file a claim with thelabour Court within three weeks ofreceipt of the termination notice if he orshe believes the dismissal wasunjustified. Where the Court finds thatthe dismissal was not valid, theemployee will as a rule be reinstated inhis former position. For the periodbetween the invalid termination of theemployment and reinstatement of theemployee, the employer will be obligedto pay salary in arrears (default salary)if the employee has not secured analternative employment income duringthis period. Only in exceptional cases



80


may the Court terminate the contract onthe ground that the terminatedemployee or the employer does not findit acceptable to continue theemployment relationship. In thesecircumstances the Court will awardcompensation of up to 18 months’ pay(depending on the length of service, theage and social circumstances of theemployee) to the employee.

One notable feature of the Germansystem for dealing with disputes overdismissal is the employee’s ability incertain cases to insist on remainingactively employed throughout the periodduring which the claim is being heard,notwithstanding the eventual outcome ofthe claim.

13.3 Reasons for DismissalIf the Protection Against Unfair DismissalAct (Kündigungsschutzgesetz) is notapplicable, there need not be a reasonfor termination. The dismissal mustnevertheless comply with the provisionsof the Anti-Discrimination Act(Allgemeines Gleichbehandlungsgesetz).

If the Protection Against Unfair DismissalAct is applicable, which is broadly thecase when the business has more thanfive employees, (or if the employmentrelationship in question started on orafter 1 January 2004, if the business hasmore than ten employees) and theemployee in question has been with thebusiness for more than six months atthe date of termination, a contract ofemployment can only be terminated ifthere is either:

■ gross misconduct, e.g. theft from theemployer or colleagues, or a materialbreach of a non-competitioncovenant, in which case theemployer can dismiss the employeewithout notice (fristlose Kündigungaus wichtigem Grund); or

■ one of the following justifyingreasons (“social justification”):misconduct, character/personalityreasons (such as drug addiction,illness) or genuine economicbusiness reasons (so-called“dismissal for operational reasons”).

In the case of dismissal for misconduct,

the employer must have previously givena final warning (Abmahnung) to theemployee. In cases of termination forgenuine economic business reasons,if there were several comparableindividuals who could have beendismissed for this particular reason, theemployer must show that it selected theemployee in accordance with themandatory legal requirements, takinginto account the social criteria i.e. lengthof service, age, obligations towardsdependants and disability (so-called“social choice”).

The burden of proof for establishing thatthe dismissal was socially justified is, ifchallenged by the employee, on theemployer. In practical terms, this is oftendifficult to establish and the labourCourts are known for generally favouringthe employee.

To date the relationship between theProtection Against Unfair Dismissal Actand the Anti-Discrimination Act is ratherunclear. However, having regard to thefact that the Act is intended toimplement European law it seems likelythat the Anti-Discrimination Act will betaken into account by the labour courtswhen interpreting the Protection AgainstUnfair Dismissal Act.

13.4 Special ProtectionCertain employees are offered specialprotection from dismissal. For example,the consent of the appropriate labourauthority must be obtained before aseverely disabled individual, a pregnantwoman or a parent on parental leavecan be dismissed. Works councilmembers are protected from dismissalthroughout their period of membershipand for one year thereafter (except in thecase of gross misconduct).

13.5 Closures and Collective DismissalsUnder the Works Constitution Act,in companies employing more than20 employees in Germany, the employeris obliged to inform the works council ofany planned closures, collectivedismissals or any other business oroperational changes (including splits andmergers of businesses) which may resultin material adverse effects for theworkforce in Germany. Case lawprovides that a collective dismissal is

defined by reference to a clause in theProtection Against Unfair Dismissal Actand based on the total number ofemployees in the undertaking and thenumber of employees affected. Forexample, the dismissal of six or moreemployees in an undertaking with morethan 20 and less than 60 employees,or a dismissal of 10 per cent or25 employees in an undertaking withmore than 60 and less than 500employees would be deemed acollective dismissal in this context.The employer also has to negotiate withthe works council and attempt to agreemeasures for a reconciliation of interestsplan (Interessenausgleich) and concludea social plan (Sozialplan) specifyingcompensation measures (for example inthe case of collective dismissals bydetermining severance payments to bemade to dismissed employees, usuallybased on a formula taking into accountlength of service and salary). If theparties fail to agree upon such a socialplan it will be determined by theconciliation committee at the request ofeither party.

Operative changes undertaken by theemployer without prior attempt to agreeon a reconciliation of interests plan areillegal and may entitle employees toseek damages from the employer forfinancial prejudices sustained for aperiod of up to 12 months andseverance payments. Dismissalseffected in breach of these rules are,however, still valid in relation to theindividual employee. Also, the workscouncil may apply to the labour Courtfor a preliminary injunction forbidding theemployer to proceed with theimplementation of its plans in Germanyuntil the co-determination obligationsvis-à-vis the works council have beencomplied with.

In cases of collective dismissals, theemployer must also comply with specialprovisions of the Protection AgainstUnfair Dismissal Act. The plannedcollective dismissals must be notified tothe Labour Authority before atermination notice is served on theemployee and at least 30 days beforethe end of the employment relationship.At least two weeks prior to thisnotification, the works council must be


81

informed in writing of the plannedcollective dismissals. Failure to complywith these obligations may render thedismissals invalid.

14. Data Protection14.1 Employment RecordsThe Data Protection Act regulates thecollection, processing and use ofpersonal data. Generally the DataProtection Act allows private persons toprocess and use personal data whenthis is permitted or required by statute orwhen the affected person consents.There is so far no specific legislationgoverning data protection in theemployment context although theGerman Parliament has announced itsintention to draft an Employment DataProtection Act in the future.

The Data Protection Act permits therecording, processing and use ofpersonal data within a contractual orquasi-contractual relationship withoutrequiring the person’s individual consent,if this is covered by the legitimatepurpose of the contract. Whether or notthis prerequisite is fulfilled must bedetermined in each case taking intoaccount the concrete facts andcircumstances.

During recruitment the candidate entersinto a quasi-contractual relationship withthe potential employer entitling it tocollect information provided by thecandidate or by third parties, forinstance by former employers, but only ifthere is a connection with the targetedemployment. Once it has beenestablished that the application of acandidate has not been successful theemployer is obliged to delete anypersonal data collected, unless thecandidate has agreed to the futurestorage and use of such data. Since theAnti-Discrimination Act shifts the burdenof proof onto the employer in the eventdiscrimination claims are brought againstit (see above), it is likely that keepingpersonal data on file will in future bedeemed justified at least until the threemonth period for lodging claims at courthas expired.

During employment the employer isallowed to record, process and usepersonal data which are covered by the

purpose of the specific employmentagreement, such as gender, maritalstatus, education and periods ofabsence, etc. without requiring theexpress consent of the employee. Upontermination of the employment theemployer is generally obliged to deletethe personal data except to the extentthat it is legally required to store specificpersonal data for specified purposes.However, with regard to such personaldata whilst the employer is not obligedto delete it, it is no longer permitted touse or process it.

The employer has to ensure that hekeeps personal data accurate andconfidential although this is notexpressly stipulated in the DataProtection Act.

The works council has a right of co-determination, which includes all mattersrelated to the employer’s storage, useand processing of personal data as wellas monitoring of email and Internetusage. For instance, the registration oftelephone connections as well as theprocessing of work reports is notpermitted without the consent of theworks council. The Data Protection Actdoes not constrain information andaccess rights of the works councilcovered by the Works Constitution Act.

In businesses employing more than fiveemployees, in the context of automateddata processing, the employer is obligedto appoint a data protection officer whois in charge of ensuring compliance withthe Data Protection Act. The employermust support the data protection officialin his functions. The data protectionofficer can only be dismissed at thedirection of the competent supervisoryauthority or for reasons of grossmisconduct, which justify a terminationwithout notice.

14.2 Employee Access to DataThe German Works Constitution Act(Betriebsverfassungsgesetz) gives eachemployee the unfettered right to accesshis employment records during workinghours. After termination of employment,the former employee has todemonstrate a specific interest beforebeing allowed to access his employmentrecords.

14.3 MonitoringThe monitoring of telephone usage is asa rule limited to the registration of thetelephone connections. The employer isgenerally not allowed to listen in andrecord employees’ telephoneconversations, unless expresslysanctioned by individual consents,regardless of whether they are private orbusiness-related. If such measures arenecessary for the prevention of criminaloffences committed by the employee orsignificant damage to the employer,such monitoring may as an exception tothe rule be permissible even if no priorconsent was obtained.

The legal position as regards themonitoring of employees’ e-mail andinternet use is uncertain as only limitedprecedent case law exists. In all caseswhere employees are allowed (expresslyor tacitly) to use the existing e-mail andinternet infrastructure at work for privatepurposes in addition to business-relatedpurposes, whether this is during oroutside the employee’s working time, itmust be assumed that virtually nomonitoring of e-mail and internet may becarried out by the employer unlessexpress written consent is obtained fromeach employee. As recent legislation hasexpanded the applicability oftelecommunications law to employer-employee relationships, any violation ofthe legislative provisions risks beingclassified as a criminal act. It is thereforeadvisable to address the subject of howthe e-mail and internet infrastructuremay be used and to what extent the usewill be monitored in appropriatecompany policies, or works agreementsconcluded with the works council (if anyexists) and to obtain individual consentfrom the employees as well.


Transfer of employee data to thirdparties is generally prohibited unless theaffected person consents. Thisprohibition also extends to oralsubmission of personal data and willalso prevail after the termination of theemployment contract. The transfer ofpersonal data in the context ofoutsourcing of certain functions, such aspayroll, is only permitted if the followingpreconditions are fulfilled:



82


■ The employer and the third partycontractually agree in writing terms ofthe processing of data (processingorder (Auftragsdatenverarbeitung)).

■ The order has to contain provisionsaddressing the modalities ofprocessing and use of the data anddata protection measures.

■ The employer remains responsiblefor compliance with the DataProtection Act.

If the outsourcing does not meet therequirements of a data processing order,the express written consent of eachindividually affected employee is requiredbefore outsourcing the function. Whenthe third party is based outside the EEAor if the data in question does not fallwithin the ambit of EC Law the transferto third parties is only permitted by theData Protection Act if the recipientcountry provides an adequate level ofprotection for personal data or one of aseries of limited exceptions apply.


83

Greece1. IntroductionThe standards which apply toemployment relationships and the termsand conditions under which an employeeworks are laid down within a frameworkof rules created by the Constitution,laws, collective agreements, internalregulations and custom.

In broad terms, labour law regulatesmatters such as pay, benefits,allowances and other workingconditions. Collective agreements andother internal regulations provideregulation on other issues such asannual wage increases, cost of livingadjustments, allowances and benefitsincreases, equal access to promotionopportunities and promotion at work etc.

There is a hierarchy of legal sources oflaw so that, in general, provisions from alower source, (e.g. a contract), shouldnot conflict with those from a highersource, (e.g. a legislative rule), exceptwhere the provisions of the lower sourceare more favourable to the employee.Legislation is a higher source of law thancollective agreements, but the provisionsof an employment contract cannotcontravene an applicable collectiveagreement, unless that contract is morefavourable to the employee.

The Greek Code of Civil Procedureprovides a special procedure in relationto employment disputes, whereby theCourts are obliged to attempt toreconcile both parties during the firsthearing. In addition, the Code also givestrade unions and professionalorganisations the right to participate inpending litigation involving one of theirmembers and the right to be party tolitigation which concerns theinterpretation and application of acollective agreement, with the aim ofprotecting the common interests ofthose whom they represent.

2. Categories ofEmployee

2.1 GeneralA distinction used to be drawn betweenblue collar employees (carrying outmanual work) and white collar

employees (carrying out office work) inrelation to notice periods, redundancypay, annual holidays, payment of salaryetc. This distinction has now beeneliminated with regard to most labourissues, except in relation to terminationof employment (see below).

Generally, legal provisions protectingemployees are equally applicable to theemployment of senior executives anddirectors. However, certain provisionssuch as those relating to overtime, nightwork and holiday bonuses are notapplicable to senior executives.

Employees may be engaged on a part-time basis. Full-time vacancies must firstbe offered to part-time employees.Salary and benefits are calculated prorata to those for full-time employees,and a specific social security regime isapplicable to part-time employees.

3. Hiring3.1 RecruitmentAll recruitment by private sectoremployers must be done through theState Employment Agency (OAED),except if they announce the relevantemployment to OAED.

There are quotas for the employment ofspecial categories of protectedindividuals (e.g. veterans of the GreekResistance). Greek or foreignundertakings which operate in Greecewith more than 50 employees mustemploy at least eight per cent ofprotected personnel, whether or notthere is a vacancy.

3.2 Work PermitsA work permit issued by the localPrefecture (of the place of theemployer’s place of business) is requiredfor the employment of non-EEAnationals. Application for a permit mustbe accompanied by certain documentsand certificates. If the Prefecture grantsa work permit, it is then forwarded tothe Consulate of the foreign national’splace of residence which then issues thevisa for entry into Greece. A residencepermit must also be obtained from thelocal Municipality.

Less stringent provisions apply in relationto certain categories of senior employee,

including management level employees,Board Members of multinationals,high-ranking executives of subsidiarycompanies and branch offices of foreigncompanies. Such employees arepermitted to enter Greece after obtaininga special entry permit from the GreekConsulate in the applicant’s country ofresidence. The application for such anentry permit must be accompanied by anumber of specified documents.Upon arrival in Greece, the Prefecture willissue a work permit upon production ofthe entry visa and the employmentcontract. A residence permit will also haveto be obtained from the local Municipality.

4. DiscriminationThe Greek Constitution, EU legislation,ratified international agreements andvarious other laws and decrees prohibitdiscrimination on grounds of sex,nationality, union membership, familystatus, political belief, disability etc andprovide for equal treatment of men andwomen.


5.1 Freedom of ContractContracts of employment may neitherderogate from the rules of public policynor from the provisions of any relevantcollective agreement, labour regulationor arbitration decision, except if theprovisions of the contract are morefavourable to the employee. In practice,the contract of employment creates aframework for the employmentrelationship, while its content isdetermined by overriding legislation andcollective agreements.

5.2 FormThere are no particular legalrequirements in relation to the form andthe content of an employment contract.Contracts may be oral or written, exceptin respect of part-time employmentwhere the contract must be evidencedin writing. Legislation does howeverimpose restrictions on the successiveuse of fixed term contracts.

By virtue of Presidential Decree156/1994, which has implemented EUDirective 91/533/EEC, the employer isobliged to inform the employee of thesubstantial terms of the employment

Employment and Benefits in the European UnionGreece


84


contract. The information in questionmust include at least the following:

■ the identities of the contractingparties;

■ the place of performance of workand the residence address of theemployer;

■ the post or specialisation of theemployee, his rank, the category ofhis employment and the object of hiswork;

■ the date of commencement of theemployment contract or the workrelationship and its duration, ifconcluded for a fixed-term;

■ the duration of paid leave to whichthe employee is entitled, as well asthe manner and time of its payment;

■ the amount of compensation dueand the time limits the employer andemployee must comply with in caseof termination of the contract or ofthe work relationship with notice;

■ the wages of any kind to which theemployee is entitled and thefrequency of payment thereof;

■ the duration of the normal daily andweekly employment of theemployee; and

■ reference to any applicable collectiveagreement which defines theminimum terms of remuneration andwork of the employee.

An employer will satisfy his obligations ifthe written employment contractincludes the information outlined above.

5.3 Trial PeriodsTrial periods must not exceed the timeneeded by the employer to assess thecapabilities of the employee concerned.Such trial periods are taken into accountfor the calculation of severancepayments, retirement indemnities,holiday entitlement etc.


There is a general duty on employees tokeep the employer’s secrets confidential.

Provisions that prevent employees fromworking for a competitor for a periodafter termination may be included incontracts of employment, so long asthey are reasonable and do not harmthe employment prospects of theindividual concerned.

5.5 Intellectual PropertyIf an employee creates intellectualproperty in the course of hisemployment, the creator remains theinitial beneficiary of the real and moralrights to such property. In the absenceof an agreement to the contrary, thoserights, deriving from the real rights,which are necessary for the fulfilment ofthe purpose of the contract areautomatically transferred to theemployer.

Inventions made by an employee belongto that employee except in twocircumstances. Firstly, when an inventionis the result of an employment contract,the object of which is research anddevelopment, it will belong exclusively tothe employer. Secondly, when theinvention is made during the term of acontract using equipment andinformation which belong to theemployer, 40 per cent of the inventionwill belong to the employer and 60 percent to the employee. The employer haspriority in the use and exploitation of theinvention, but is obliged to compensatethe employee according to the value ofthe invention and the benefits accruedfrom its exploitation.

6. Pay and Benefits6.1 Basic PayMinimum pay levels are set for mostemployees by collective agreementsnegotiated annually by the Federation ofGreek Industries (SEB) and the GeneralConfederation of Greek Labour (GSEE).With effect from 5th May 2007, unskilledand unmarried adult employees withless than three years’ service are entitledto a minimum monthly salary of c657.89or a minimum daily wage of c29.39.

Employees are entitled to the followingbonuses:

■ Christmas bonus – one month’ssalary or 25 days’ wages foremployees paid on a daily basis;

■ Easter bonus – half of a month’ssalary or 15 days’ wages foremployees paid on a daily basis; and

■ holiday bonus – half of a month’ssalary or 13 days’ wages foremployees paid on a daily basis.

The automatic salary increase system isno longer applicable. Basic payincreases are regulated by collectiveagreements and are generally grantedtwice a year.

6.2 Private PensionsPrivate pension schemes areuncommon, and those that do exist areprovided by subsidiaries of multinationalcompanies or by large employers suchas banks. The basic rules governingprivate pension schemes have not yetbeen systematically dealt with and thereis currently no specific legislativeprovision.

6.3 Incentive SchemesShare participation schemes wereintroduced by law in 1987. Under theseschemes, undertakings can distributeprofits to their employees each year inthe form of shares.

6.4 Fringe BenefitsCars, enhanced health coverage andhousing facilities are benefits mostcommonly provided to seniorexecutives.

6.5 DeductionsEmployers are obliged to deduct incometax at source according to a scaleprovided by the tax authorities.

7. Social Security7.1 CoverageThe majority of Greek employees arecovered for basic social security benefitsby the Social Insurance Institute (IKA),which covers industrial and commercialworkers, and OGA, which coversagricultural workers. Fairly generouscover is given in respect of retirement,survivors and disability benefits as wellas health care and sickness benefits.The Manpower EmploymentOrganisation (OAED) provides familyallowances and unemployment benefits.In addition, there are a large number ofcompulsory schemes which provide


85

additional benefits, normally forparticular categories of employees withincertain industries.

7.2 ContributionsSocial security contributions arecompulsory and payments are collectedby IKA from both employers andemployees. Contributions are calculatedby reference to actual earnings.

Benefits Employers’ Employees’ Totalcontributions contributions% %

IKA benefits

(a) Pension 13.33 6.67

(b) HealthBenefits 5.10 2.55

IKA Team 3.00 3.00

OAED benefits 5.53 2.43

Other benefits 1.10 1.35

Total 28.06 16.00 44.06

8. Hours of WorkThe law lays down the maximumnumber of hours that may be worked:eight hours per day and 40 hours perweek (although there are further limits onthe working hours of employees whohave recently given birth etc). Theselimits may be varied in certain industriesby collective agreement.

Legislation provides for specialauthorised overtime work of up to threehours a week, paid at a premium of 50per cent (over the hourly rate).

Authorised overtime is paid at apremium (over the hourly rate) of 50 percent for overtime worked up to 120hours annually, and 75 per cent forovertime worked in excess of 120 hoursannually. Employees who work on aSunday or a public holiday are entitledto an additional premium of 75 per centof their daily wage.

Despite the fact that unauthorisedovertime is subject to severe penalties (apremium of 250 per cent of the hourlyrate), non observance of the law iswidespread.

Depending on their age and the natureof employment, young people are notallowed to work at night.

9. Holidays and Time Off9.1 HolidaysEach employee from thecommencement of his employment untilthe completion of 12 months’ service, isentitled to pro-rated annual paid holidayon the basis of 24 working days (in thecase of a six day working week) or20 working days (in the case of a fiveday working week). During the firstcalendar year the employee is entitled toa pro-rated holiday entitlement.

During the second calendar year theemployee is entitled to annual paidholiday proportionate to the duration ofhis employment. For each subsequentcalendar year, as from the 1st ofJanuary, the employee is entitled toannual paid holiday which is calculatedas set out above.

Annual holiday is increased by oneworking day for each year of serviceafter the first year (up to 26 workingdays for a six day working week or22 working days for a five day workingweek).

After 10 years’ service with the sameemployer or 12 years’ service withvarious employers, there is anentitlement to 25 days’ paid holiday(in the case of a five day working week)and 30 days’ paid holiday (in the case ofa six day working week).

Some collective agreements give paidholiday entitlement above the statutoryminimum.

There are also five public holidaysrecognised each year (25 March, EasterMonday, 1 May, 15 August andChristmas). An optional public holidayfor the private sector is 28 Octoberwhile it is a compulsory one for thepublic sector. Many collectiveagreements increase the number ofpublic holidays.

9.2 Family LeaveThe 2000-2001 National CollectiveLabour Law Agreement provides thatfemale employees are entitled to 17weeks’ maternity leave, eight of whichmust be taken before the birth. Thematernity allowance paid by IKA duringthe leave is 50 per cent of a notional

salary (which depends on theclassification of the employee and isincreased by the number of dependants,however it cannot be lower than twothirds of the actual net wages of theemployee). The employer is obliged topay the difference between socialsecurity benefits and the employee’snormal salary for half of one month orthe whole of one month depending onthe seniority of the employee, and forthe remaining period the employee ispaid the difference by OAED.

Fathers are entitled to two days’ paidfamily leave upon the birth of a child.

Parents are entitled for thirty monthsafter the end of maternity leave, either tocommence or leave work one hourearlier, every day. In agreement with theemployer, the parent is entitled to takepaid leave in lieu of this right reduceddaily working hours.

Unpaid parental leave of up to three anda half months may be claimed in certaincircumstances by both parents after theend of the mother’s maternity leave untilthe child reaches the age of three and ahalf. Up to four days each year may alsobe taken on a day by day basis as paidparental leave to enable either parent tomake arrangements for the child’seducation. The parents of disabledchildren are entitled to extra days specialleave each year.

9.3 IllnessIn the event of illness, the employee iscovered by both the employer and IKA.Depending on the length of service ofthe employee, the employer is liable incases of sickness to pay on an annualbasis up to half a month’s salary(13 days’ wages) or one month’s salary(26 days’ wages) from which IKAallowances are deducted. IKA providessickness allowances from the fourth dayof absence.

10. Health and Safety10.1 AccidentsIn most cases employees are coveredby IKA in the event of accidents at work.Employers are personally liable withregard to employees who are notcovered by IKA insurance or forcompensation for moral harm. Whether



86


the employee is covered by IKA or not,the employer is nevertheless liable tocompensate the aggrieved employee inthe event of an accident at work due tothe employer’s fraud.

10.2 Health and Safety ConsultationIn undertakings with 50 or moreemployees, employees have the right toelect safety committees and/orrepresentatives who are entitled toreceive certain information and to beconsulted. In extreme cases of danger,safety committee members andrepresentatives have the right tosuspend production.

11. Industrial Relations11.1 Trade UnionsThe 1975 Constitution guarantees tradeunion freedom. The constituentdocuments of a trade union must besigned by at least 20 people.

Labour Centres, which group togetherlabour unions of a particular localdistrict, supervise the enforcement oflabour laws in that district and resolveorganisational problems encountered bylocal unions. Federations representindustry on a sector by sector basis andsign collective agreements. LabourCentres and Federations are organisedinto national confederations. The mostimportant confederation is the GeneralConfederation of Greek Labour (GSEE).The GSEE negotiates the annualnational collective wage agreement withthe Federation of Greek Industries (SEB)which is the main employers’association.

11.2 Collective AgreementsOnly organisations which arerepresentative have the right to concludevalid collective agreements. The lawdefines five categories of collectiveagreements: national collectiveagreements, sectorial agreements,national and local vocational agreementsand special agreements. The first fourare concluded by the appropriate tradeunions and employers’ associations andare applicable at different levels, whilethe latter is concluded by the employerrepresenting a workforce of at least50 employees and the trade unionsrepresenting the employees in theundertaking.

Collective agreements are binding onthe parties which have concluded them.The Ministry of Labour can also decideto extend their application to allemployees or employers in an industrysector or a particular trade. Collectiveagreements have precedence overprivate contracts, but may not containprovisions less favourable than thoseprovided by law.

11.3 Trade DisputesThere is a right to strike under the GreekConstitution. In order to be lawful,industrial action must only be used as ameans of protecting the interests ofworkers in relation to pay, insurance,union rights and working conditions.A decision to strike must be notified tothe employer at least 24 hours beforethe strike by a recognised trade union,and an authorisation to strike must beprovided by the relevant body within theunion. If these rules are not observed,the strike is illegal and the employmentcontracts of the striking employees canbe terminated.

In the event of disputes in relation toemployment matters, including thoserelating to collective agreements,employers and trade unions can requestthe intervention of a “conciliator” fromthe Ministry of Labour or the LabourOffice of the Prefecture. In the case of acollective dispute not resolved throughthis Ministry official, parties can use theservice of an official mediator who willhear the case and make the necessaryinquiries. At any stage of thenegotiations, the parties can byagreement or unilaterally in specificcircumstances submit the dispute toarbitration. Both mediators andarbitrators must be independent in theexercise of their duty; some of them areappointed by the “Organisation ofMediation and Arbitration” for a period ofthree years.


Undertakings with 20 or moreemployees are entitled to set up a workscouncil in cases where there is no tradeunion represented in the undertaking.Undertakings with 50 or more staff areentitled by law to set up a works councilmade up of employees only.

The law stipulates that the works councilrepresents all the employees in anundertaking whether or not they aretrade union members. However, theexistence of a works council does notprejudice the role of trade unions, whichhave the right to press for betterconditions than those agreed betweenthe works council and the employer.

Works council members are elected fortwo-year terms and their number variesaccording to the size of the undertaking.The employer and the works councilmust meet in the first ten days of everysecond month, or whenever one of theparties so requests. The works councilis entitled to take decisions togetherwith the employer on such matters ashealth and safety, annual leave, training,disciplinary procedures, and cultural andsocial activities at the work place. Theemployer is obliged to provide the workscouncil with information on a wide rangeof issues.

Employee participation in the managerialdecision-making process is currentlybeing pioneered in both the private andpublic sectors.


12.1 GeneralA 1988 Presidential Decree implementedthe EU Acquired Rights Directive.It more or less follows the wording of theDirective which gives protection toemployees in the event of a businesstransfer and which gives employees’representatives information and,sometimes, consultation rights.


In the event of a transfer of anundertaking the transferor and transfereemust inform representatives ofemployees who will be affected by thetransfer of: (i) date of the transfer; (ii) thereasons for the transfer; (iii) the legal,financial and social consequences forthe employees and (iv) the measuresthat will be taken in relation to theemployees. This information must beprovided in good time prior to thetransfer. If measures are envisaged bythe transferor or transferee that willaffect the status of the employees they


87

must consult with the representatives insufficient time to allow an agreement tobe reached. The results of theconsultation are embodied in minutes.

The employee representatives will be theworks council, or in the case of aworkforce of less than 50, the tripartitecommittee provided for by the relevantregulations. In the absence of either ofthese the individual employees must beprovided with the information outlinedabove.

12.3 Notification of AuthoritiesThere is no specific obligation on eithertransferee or transferor to notify theauthorities of any business transfer.

12.4 LiabilitiesFailure to comply with the informationand consultation obligation in respect ofemployee representatives or employeescan give rise to a fine ranging from c147to c8,804. This can be imposed on bothtransferor and transferee.

In addition the Court can grant aninjunction until theinformation/consultation obligations arecomplied suspending the transactionprovisionally.

There are no criminal sanctions for failingto comply with the information andconsultation obligations.

13. Termination13.1 Individual TerminationThe right to work is protected under theGreek Constitution and any provisionthat limits that right is narrowlyinterpreted by the Courts. This isrelevant, for instance, to fixed-termcontracts which provide less protectionthan contracts for an indefinite term.If an employer ends a fixed-termcontract prematurely, except for seriouscause, he or she is obliged to pay theemployee’s full salary until the agreedterm of the contract has elapsed.

13.2 NoticeThe law provides different rules forterminating the contracts of blue collarand white collar employees. Dismissalsof both types of employees withcontracts for an indefinite term must benotified in writing and handed to the

employee in person, whether thecontract is terminated with or withoutnotice.

For white collar workers, the basicnotice period depends on theemployee’s length of service. The basicnotice periods are:

Length Notice

Two months to one year One month

One to four years Two months

Four to six years Three months

Six to eight years Four months

Eight to 10 years Five months

Over 10 years Six months plus onemonth for each additionalyear of employment up toa maximum of 24 months(for 28 years ofemployment and above).

If a white collar employee is dismissedwithout notice, he or she is entitled to apayment in lieu according to the abovetable. If, on the other hand, adequatenotice is given to a white collaremployee, severance pay equal to50 per cent of the salary during theperiod, referred to in the above table,will also be due.

For blue collar workers, the situation ismore straightforward. Whether adequatewritten notice is given or not, the bluecollar worker is always entitled to aseverance payment as set out in thetable below:

Length of service Severance pay

Less than two months Nil

Two months to one year Five days’ wages

One to two years Seven days’ wages

Two to five years 15 days’ wages

Five to 10 years 30 days’ wages

10 to 15 years 60 days’ wages




30 years and above 165 days’ wages

In theory, an employee is obliged to giveadvance notice to the employer in thecase of resignation. The notice period orpayment in lieu to be given by whitecollar employees is equal to one half ofthat imposed on employers in cases ofdismissal with a maximum of threemonths. The notice period to be servedby blue collar workers is equal to thenumber of days for which they would

have been compensated for had theemployer terminated the contract.Payment in lieu of notice on the part ofthe employee amounts to half the wagethat would have been paid during thenotice period. In practice, this law is notusually enforced and the employee isallowed to leave freely without givingnotice or paying in lieu.

13.3 Reasons for DismissalsA dismissal may be challenged in Courtbecause of a lack of legal grounds,discrimination or failure to observe theproper procedures (for example the non-payment of severance pay). If thedismissal is declared void, the Courtmay also order the employer tocompensate the employee for the entireperiod since the dismissal.

Provided the termination is notified inwriting and subject to the principle ofgood faith, employers are, in general,not obliged to give the reasons fordismissal. The dismissal will beconsidered as “abusive” and,consequently, void if the employer hasacted in bad faith or with maliciousintent. Lawful reasons include thoserelated to the employee himself (inability,inefficiency, breach of contract, lack oftrust etc) or reasons related to theinterests of the company (economic,financial or technical). In cases ofdismissals on financial or technicalgrounds, Courts may examine whetherthe changes are needed in the realinterests of the company or whether theemployee could be kept on part-time orgiven alternative employment with thecompany.

Employers are also required to pay anindemnity:

■ to those employees who voluntarilywith the consent of the employerterminate their contracts after atleast 15 years’ service; or if theyhave reached the retirement age setby the relevant insurance fund or ifno retirement age is set, the age of65;

■ to those white collar employees whoend employment having satisfied thepre-requisites for receiving acomplete pension;



88


■ to those blue collar employees whovoluntarily terminate their contracts,having met the prerequisites forreceiving a complete pension.

The amount of compensation isequivalent to 50 per cent of severancepay or 40 per cent of severance foremployees who are insured by anauxiliary pension scheme.

13.4 Special ProtectionSeveral categories of employees aregiven special protection againstdismissal. Trade union representatives,for instance, cannot be dismissed duringtheir time in office and for a yearafterwards, unless there are specificreasons which are not linked with theirunion duties. Employees on militaryservice or those who have distinguishedthemselves in time of war as well asfemale employees during pregnancy andfor a period afterwards enjoy similarprotection.

13.5 Closures and Collective DismissalsIn the event of the closure of aworkplace, the employer must terminatethe contracts lawfully and comply withthe rules regarding the termination ofemployment.

Collective dismissals are defined by lawas dismissals which affect more than acertain percentage of employees in anyundertaking with more than20 employees. Before dismissing,employers must inform employeerepresentatives in writing of the intentionto dismiss part of the workforce andconsult with these representatives.Relevant information must be sent tovarious authorities, such as the Head ofthe Employment Office and the Head ofthe Prefecture or Minster of Labour andthe Employment Office depending onthe case. If no agreement is reachedbetween the parties, the Head of thePrefecture or the Minister of Labour canextend the consultation period foranother 20 days or even refuse toapprove the application to allow theproposed dismissals.

14. Data Protection14.1 Employment RecordsThe collection, storage and use ofinformation held by employers about

their employees and workers(prospective, current and past) areregulated by the Data Protection Act1997 (DPA), which implements the EUData Protection Directive. Infringementof data protection law can lead to fines,administrative and penal, compensationclaims from affected employees orregulatory action.

Essentially employers, as datacontrollers, are under an obligation toensure that they process personal dataabout their employees (whether held onmanual files or on computer) inaccordance with specified principalsincluding the following: a requirement toensure that data is accurate, up to date,and is not kept longer than is necessaryand a requirement that it is storedsecurely to avoid unlawful access oraccidental destruction or damage to it.

Employers are generally advised toensure they have some sort ofdocument retention policy in place andto ensure that staff are aware of theirdata protection obligations.

14.2 Employee Access to dataEmployees, as data subjects, have theright to make a subject access request.This entitles them, subject to certainlimited exceptions, to be told what datais held about them, who it is disclosedto and to be provided with a copy oftheir personal data. There is a 15-daytime limit for responding to such arequest. Subject access requests coverpersonal data held in manual andelectronic records such as e-mail.

14.3 MonitoringThe monitoring of employee e-mail,Internet and telephone usage andClosed Circuit TV monitoring isregulated by the DPA amongst otherpieces of legislation. Monitoring ispermissible provided that it is carried outin accordance with the DPA principlesand processing conditions (and whereappropriate in accordance with anyother applicable legislation). Any adverseimpact of monitoring on employeesmust be justified by its benefit to theemployer and/or others. Expressemployee consent to monitoring is notusually required, however, employeesshould be made aware that monitoring

is being carried out, the purpose forwhich it is being conducted and who thedata will be supplied to, unless covertmonitoring is justified. Where disciplinaryaction is a possible consequence ofanything discovered this too should bemade clear to employees.


An employer who wishes to provideemployee data to third parties must doso in accordance with the DPAprinciples and processing conditions.Where the third party is based outsidethe EEA it should be noted that the DPAprohibits the transfer of data to acountry outside the EEA unless thatcountry ensures an adequate level ofprotection for personal data or one of aseries of limited exceptions apply.


89

Hungary1. IntroductionThe basic rules of employment areregulated by Hungary’s Labour Code,which at present implement the majorityof EU employment law directives.Collective agreements and employmentcontracts may only regulate employee’srights and obligations as far as these arenot dealt with in the Labour Code, or, ifthey are more favourable to theemployees. In addition, employmentcontracts cannot cover rights andobligations dealt with in applicablecollective agreements, except to theextent that they are more favourable tothe employee.

Given the Hungarian labour courts’extremely pro-employee approachHungarian employment law should becarefully complied with and if there isany doubt regarding the interpretation ofemployment law provisions, theemployee’s interests should be respected.


2.1 GeneralThe Labour Code applies to allemployees. However, Hungarian labourlaw categorises employees on the basisof their role within the employer’soperations and distinguishes betweenexecutive employees and otheremployees. This distinction is reflected inthe regulation of employees’ rights andobligations.

2.2 DirectorsIndividuals who hold the most seniorpost within an employer’s organisation,his/her deputy and employees in aposition which the employer’s supremedecision making body (i.e. theshareholders’/members’ meeting) havedesignated as a key position from thepoint of view of the employer’soperations are all executives as a matterof Hungarian law.

Executives are exempt from certainprotective provisions of the Labour Coderelating to working time or terminationfor example and have greater liability fordamages caused in connection withtheir employment.

2.3 OthersExcept as otherwise provided for in theemployment contract employees are full-time. Part-time employees are entitled tothe same protection as full-timeemployees. Any differences in treatmentof part-time employees must be onjustified grounds connected to thecharacteristics of part-time employment(e.g. pro rata salary).

3. Hiring3.1 RecruitmentThe employer’s recruitment process isnot regulated under Hungarian labourlaw.

However, the employer must consult therepresentative Trade Union and theWorks Council on major personnelplanning.

Employers with 20 or more employeesmust pay a yearly rehabilitation taxunless at least five per cent of their staffconsists of disabled persons.

3.2 Work PermitsThe new member states’ citizens as wellas the citizens of the United Kingdom,Ireland, Finland, Greece, Portugal,Spain, Italy and Sweden do not need toobtain a work permit for employment inHungary. Non-EEA nationals andcitizens of the remaining EU memberstates must obtain a work permit priorto the commencement of employment inHungary. An individual work permit,which must be applied for by theemployer, may be granted for amaximum of one year and may berenewed.

EEA nationals may freely enter and stayin Hungary for a period not exceeding90 days. If the term of their stayexceeds 90 days, they must obtain anEEA residence permit. An EEA residencepermit is valid for a maximum of fiveyears and is renewable. This general ruleis applicable to the stay of non-EEAnationals but may vary depending onthe citizenship.

4. DiscriminationDiscrimination on grounds of gender,race, colour, nationality, age, state ofhealth and other characteristics notrelated to the employment is prohibited.

This principle is also applicable duringthe recruitment process.

In the event of a dispute on the groundsof discrimination, it is the employer whomust prove that its conduct was notdiscriminatory.


5.1 Freedom of ContractAlthough employer and employee arefree to agree on the terms ofemployment, the terms of theemployment contract, if they aredifferent from the rights and obligationsprovided for by law, must be morefavourable for the employee than thestatutory minimum standards. Industry-wide collective agreements may alsoapply in certain sectors and collectiveagreements may apply to employers.The employment contract may onlycontain terms different from those setout in the collective agreement if theyare more favourable for the employee.

5.2 FormIn general terms, employment contractsmust be in writing. However, oralemployment contracts may be valid ifthe employee fails to challenge thevalidity of the oral employment contractwithin 30 days of its conclusion.

In order to be valid an employmentcontract must at least contain details ofthe parties, the employee’s position, theplace of work and the salary.The employer must, within 30 days ofthe start of employment, notify theemployee in writing of certain essentialconditions of his/her employment,however, non-fulfilment of this obligationdoes not render the employmentcontract invalid.

Fixed term contracts may be enteredinto for a maximum term of five years.This rule is also applicable to theaggregate of consecutive renewals. If afixed-term employment contract isrenewed for reasons that are consideredunjustified the contract may qualify as acontract of indefinite duration.These rules, however, are not applicableto senior executives.

Employment and Benefits in the European UnionHungary


90


With certain exceptions, a fixed termcontract automatically transforms into acontract of indefinite duration if theemployee performs work following theexpiry of his/her employment contractand his/her direct superior does notobject to it.

5.3 Trial PeriodsEmployer and employee are free toagree on a trial period but this cannotexceed three months.

The minimum notice entitlement rules donot apply when terminating employmentduring a trial period.


Employees are subject to statutory non-competition provisions during the termof their employment. Executives mustcomply with stricter non-competitionrequirements.

Non-compete agreements restrictingcompetitive activities following thetermination of employment must providefor a minimum level of compensation tobe paid to the employee. In practice thisis generally 50 per cent of theemployee’s previous remuneration forthe period of restriction and therestriction cannot exceed three years.

Employees have a general duty duringtheir employment to refrain from anyconduct that interferes with theemployer’s lawful economic interests.If expressly agreed between the parties,this obligation on the part of theemployee may be maintained followingthe termination of employment in linewith the rules on non-competeagreements. Employees are prohibitedfrom disclosing business secrets bothduring employment and followingtermination. Disclosure of businesssecrets may, in certain circumstances,constitute a criminal offence.

5.5 Intellectual PropertyIn general terms, the economic rights tointellectual property created by theemployee as part of his/her jobdescription belongs to the employer.In respect of certain types of intellectualproperty, the employee may be entitledto compensation for these rights.

6. Pay and Benefits6.1 Basic payEach year, the Hungarian Governmentestablishes the level of minimum pay.The monthly minimum wage in 2007 isHUF 65,500 (approx. c250). Collectiveagreements may also establish aminimum pay rate for employees ofcertain categories.

Wages are paid either on a time orperformance basis or a combination ofthe two. Time wages are paid on anhourly (common among blue collarworkers) or monthly basis.

Pay in Hungary is not index linked.However, where employers come withinthe scope of a collective agreement, thewages are usually re-negotiated annuallywith the Trade Union.

6.2 Private PensionsThe provision of private pension plans isnot mandatory. However, largeemployers often provide private pensionarrangements as a benefit bycontributing to a pension fund for theemployee.

6.3 Incentive SchemesShare schemes are not mandatory inHungary. Large foreign parentcompanies of Hungarian employersoften offer share schemes to theemployees of Hungarian subsidiaries,however, this form of benefit is not yetwidespread in Hungary.

6.4 Fringe benefitsFringe benefits vary according to thesize of the business and the influence ofTrade Unions. These may includebonuses, company car, insurance,subsidised holiday and meal. These maybe provided either unilaterally by theemployer or on the basis of anemployment contract or collectiveagreement. In the latter case theemployer may not withdraw thesebenefits without the Trade Union’s oremployee’s consent.

6.5 DeductionsEmployers deduct the employee’sincome tax and social securitycontributions at source and account forit to the tax authorities.

7. Social Security7.1 CoverageThe basic level of social security benefitscovering old age, disability, industrialinjury, sickness, death andunemployment, is provided by the statesocial security system.

7.2 ContributionsSocial security contributions are paid byboth the employer and the employee.An employee’s social securitycontributions must be deducted atsource by the employer from theemployee’s salary. Employercontributions are 29 per cent, andemployee contributions are 12.5 percent. The percentage is based on salarywith a ceiling applicable to thecontribution to the pension fund.

8. Hours of WorkThe statutory number of working hoursper week is 40 hours and cannotexceed 48 hours. In general, dailyworking time is limited to eight hours.The employer and employee may agreeon 60 working hours per week and 12hours per day in certain exceptionalcircumstances. Hungarian labour lawprohibits working on Sundays and publicholidays except where the nature ofwork requires continuous operation(e.g. hotels, public utilities and otherpublic businesses).

Working in excess of normal hours ofwork qualifies as overtime. Executivesare not, however, entitled to overtimepay.

9. Holidays and Time Off9.1 HolidaysThere are 10 public holidays in Hungary.The number of statutory paid holidays,depends on the employee’s age andvaries from a minimum of 20 days to30 days. Collective agreements andemployment contracts may provide formore paid holidays or extra holidays incertain circumstances (e.g. executivesare often granted extra holidays).

9.2 Family LeavePregnant women are entitled to24 weeks’ maternity leave, which theymay take, if possible, from four weeksbefore confinement. After the 24-weekmaternity leave, in certain circumstance


91

either parent is entitled to additionalleave of up to three years from thechild’s birth. During this leave nopayments have to be made by theemployer. Fathers are entitled to a five-day paid holiday following the birth oftheir child.

Pregnant women and new mothers havegreater protection in terms of dismissaland their performance at work. Theposition of employees on maternity leavemust be kept vacant and increases insalary by the employer must be reflectedin the salary of the employee returningfrom maternity leave.

9.3 IllnessEmployees are entitled to 15 days’ sickleave per year during which, broadlyspeaking, they are entitled to 80 percent of their base salary (includingregular supplements to their salary) tobe paid by the employer. Following theexpiry of this 15 day sick leave period,the employee is entitled to 70 per cent(or, in case of a service of a shorter term60 per cent) of his/her average salary.Two-thirds of this amount is paid by thesocial security system and one-third bythe employer.

10. Health and Safety10.1 AccidentsAccidents at work, if not attributable tothe employer, are covered by the socialsecurity system. Detailed regulationsexist regarding safety measures at work.Non-compliance with these regulationstriggers fines imposed by the labourauthority.

10.2 Health and Safety ConsultationTrade Unions and Works Councils mustbe kept informed in relation to healthand safety measures. Employees areentitled to elect Health and SafetyRepresentatives, where the number ofemployees is at least 50. A Health andSafety Committee may be formed wherethere are three or more Health andSafety Representatives elected. Thesebodies have consultation rights andrights to information regarding healthand safety measures.

11. Industrial Relations11.1 Trade UnionsAll associations under Hungarian law the

purpose of which is the representationof employees’ interests in connectionwith their employment qualify as TradeUnions. Trade Union representatives,provided that the Trade Union hasmembers employed by the employer,are free to enter the employer’spremises in order to perform their tasksrelating to the employees’representation. Employees cannot beforced to join a Trade Union anddiscrimination against employees on thebasis of their Trade Union membershipis prohibited.

Only Trade Unions are entitled toconclude a collective agreement onbehalf of employees provided that theyare independent from the employer andsufficiently representative. Trade Unionshave consultation rights on all measuresproposed by the employer affecting asignificant number (at least 10 per cent)of employees and a right to receiveinformation on all matters affecting theemployees’ economic and socialinterests connected to theiremployment.

11.2 Trade DisputesEmployees and Trade Unions have theright to initiate strikes, provided that thestrike has work-related objectives (otherthan the amendment of the CollectiveAgreement and matters falling within thecourt’s competence) and that previousnegotiations between the parties havefailed. Works Councils are excludedfrom this right. Although strikingemployees are not entitled toremuneration during a strike,participation in a strike, provided that itis lawful, may not serve as a basis fordiscriminating against a strikingemployee.

11.3 Collective AgreementsCollective agreements may beconcluded by Trade Union(s) on oneside and an employer or employers’association on the other. An employermay fall under the scope of no morethan one collective agreement. If a TradeUnion (that qualifies as an employees’representative) initiates negotiations witha view to concluding a collectiveagreement the other party (i.e. theemployer) cannot refuse to negotiate.There is a statutory obligation on

employers to initiate the re-negotiation ofsalaries on an annual basis.

A collective agreement must bedeclared to the Ministry of Labour Affairsfor registration. The parties are jointlyobliged to notify the Ministry of LabourAffairs of any amendments to andtermination of the collective agreement.

Unless otherwise agreed between theparties, the notice period for terminatingthe collective agreement is threemonths. However, the parties areprohibited from exercising their right totermination during a six month periodfollowing the conclusion of the collectiveagreement.


Employees and their representativebodies, in relation to certain matters,have the right to information,consultation and joint decision-making.

In order to ensure employees’participation in supervising theemployer’s management, where anemployer has more than 200employees, employees have the right toelect one third of the members of theemployer’s Supervisory Board.

Although the election of a Works Councilwhere the number of employeesexceeds 50 is compulsory, unless theelection is hindered by the employer,there are no legal consequences in theevent no Works Council is elected.

In general terms, the employer mustrequest the Works Council’s opinion oneach matter affecting a significantnumber of employees. The WorksCouncil’s opinion does not bind theemployer to any extent. However,employers must pass decisions jointlywith the Works Council in mattersrelating to the utilisation of welfare fundslisted in the collective agreement and tocertain assets of a similar nature.Violation of these rights may result in theemployer’s action being ruled invalid bythe Labour Authority and the impositionof fines.



92



12.1 GeneralThe acquisition of a company through ashare purchase in itself does not triggerany specific employment law obligationson the part of the employer, as theemploying entity does not change as aresult of the transaction.

Where an acquisition is in the form of abusiness sale various employment lawobligations will be triggered. The transferof a business (or part of a business),irrespective of the number of employeesaffected by the transfer, results in theautomatic transfer of employmentcontracts related to that business(or part of that business) to the buyerproposing to operate the business.

Transferred employees have no right toobject to the transfer. Termination ofemployment on the basis of the transferof undertaking is invalid. However, thenew employer (the transferee) canterminate employment on the groundsof re-structuring or staff rationalisationfollowing the transfer.

In principle, unless the terms of thetransferee’s collective agreement aremore favourable for the transferredemployees, the transferee is bound bythe collective agreement applicable tothe previous employer (transferor) inrespect of the employees affected bythe transfer. This rule is applicable untilthe collective agreement is terminatedby the transferor or the expiration of thecollective agreement, or until anothercollective agreement is concluded withthe transferee. If none of these eventsoccur the transferee must maintain theworking conditions ensured by thecollective agreement of the transferor forat least one year following the date oftransfer.


Neither the Trade Union nor the WorksCouncil has the right to veto thetransaction. At least 15 days prior to theeffective date of the transfer thetransferor and transferee must jointlyinform the Trade Union (or the WorksCouncil in the absence of a Trade Unionor, where there is no Works Council in

place, the employees’ representatives)of the projected date of transfer, thereasons for the change in employer andthe potential legal, economic and socialconsequences of the transfer.These bodies must also be consultedin connection with other proposedmeasures affecting the employees.The information and consultation processmust take a minimum of 15 days.

Failure to complete the information andconsultation process prior to the transferdoes not prevent a transfer completingbefore the end of the consultationprocess.

12.3 Notification of authoritiesThere are no obligations to notify theauthorities about a transfer.

12.4 LiabilitiesThe transferor and the transferee arejointly and severally liable for liabilitiesincurred prior to legal succession if suchclaims of the employee are enforcedwithin one year of the transfer.

In general terms, if the transferor and thetransferee are not undertakingsindependent from each other, thetransferor is liable, as surety, for thepayments due to an employee if his/heremployment relationship is terminatedby regular notice in connection with theemployer’s operations or his/her fixedterm employment is terminated by theemployer.

If an employer fails to comply with itsinformation and consultation obligations,Trade Unions and Works Councils mayapply to court for a declaration that theemployer has breached its obligations.However, this does not affect the validityof the transfer agreement.

Infringing the rights of the Trade Unionsand Works Councils qualifies as a minoroffence and may be punished by a fineamounting to HUF 100,000 (approx.c400). Infringing the rights protecting therepresentatives of the Trade Unions andWorks Councils may be punished by afine amounting to HUF 8,000,000(approx c31,000).

13. Termination13.1 Individual terminationAn employer must comply with strictrules in relation to the termination ofemployment. Non-compliance withthese rules may result in the invalidity ofthe notice of termination, re-instatementand serious compensation obligations.However, the rules on termination varydepending on whether the employmentis of an indefinite duration, for a fixedterm or whether the employment is stillin the trial period phase. In every case,the termination notice must be in writing.

Employment may be terminated:

■ by mutual consent of the employeeand the employer;

■ by regular notice;

■ by extraordinary notice withimmediate effect;

■ with immediate effect during theprobationary period; or

■ in the case of fixed-termemployment, by the employer payingthe employee, in advance, theaverage wage due for the un-expiredpart of the contract, up to amaximum of one year’s averagesalary.

13.2 NoticeOnly in the cases of termination of acontract of indefinite duration by regularnotice are the statutory notice provisionsrelevant. The statutory minimum noticeperiod is 30 days and, depending on thelength of service with the employer, canincrease to 90 days. Employer andemployee may agree on a longer noticeperiod with the proviso that the noticeperiod cannot be longer than one year.Statutory notice entitlements are notapplicable to senior executives.Collective agreements often provide forlonger notice periods.

The employer must exempt theemployee from the duty to work for atleast half the notice period and mustcontinue to pay the employee’s salarywhile he/she performs work and his/heraverage salary while he/she is exemptedfrom work.


93

13.3 Reasons for dismissalIn the case of dismissal by regular(except for the dismissal of seniorexecutives and employees reachingretirement age) and extraordinary notice,the employer must provide reasons inwriting. As far as regular notice isconcerned valid reasons may be theemployee’s misconduct, his/her abilitiesor economic business reasons.Extraordinary notice may only be basedon gross misconduct. As a result of thelabour courts generally being pro-employee and the fact that the burdenof proof is on the employer to prove itsreasons for the dismissal, employerstend to “dismiss” employees by mutualagreement.

13.4 Special ProtectionNo regular notice of termination may beserved in certain circumstances such asfor example during an employee’spregnancy, maternity leave, sick leave ormilitary service. Trade Union and WorksCouncil must give their prior consent tothe dismissal of their members byregular notice and be consulted in theevent of an extraordinary dismissal.Employees close to retirement age maybe dismissed by regular notice only onspecifically justified grounds. This meansfor example that termination by regularnotice must be based on a greater levelof misconduct compared to otheremployees. Non-compliance with theserules renders the notice of terminationinvalid.

13.5 Closures and Collective DismissalsCollective dismissal triggers a broadobligation on an employer to inform andconsult with the representative TradeUnion, the Works Council, the locallabour authority and the individualemployees.

The Labour Code defines collectivedismissal by reference to the number ofemployees employed and the number ofemployees to be dismissed. In principle,the rules on collective dismissals apply ifthe employer has at least 20 employeesand the redundancy affects at least10 per cent of the employees. Whencalculating the number of employeesaffected, it is not only dismissals byregular notice that must be taken intoconsideration, but also termination of

fixed term employment relationships andterminations by mutual agreement.

Due to the statutory consultationprocess prior to the implementation ofthe collective dismissal, the employermay make its decision on the collectiveagreement approximately four weeksafter the initiation of the consultationprocess. The first termination noticesmay only be served approximately twomonths after the start of the consultationprocess.

The Trade Union and the Works Councilare entitled to bring court proceedings inthe event the employer fails to fulfil anyof its obligations in connection with thecollective dismissal. Notices oftermination that do not comply with theproposed collective dismissal scheduleor the agreement reached with theemployees’ representatives are invalid.

14. Data Protection14.1 Employment RecordsThe collection, use and storage ofemployee data in Hungary is regulatedby the Data Protection Act (DPA) andthe Labour Code. The DPA is supportedby the guidelines of the Data ProtectionCommissioner. Although theseguidelines are not legally bindingregulations the Data ProtectionCommissioner has the right to requestthat the employer and other personshandling the employee’s data complywith the data protection rules, to orderthe deletion of the certain data, to informthe public of any violations of the DPA,and ultimately may turn to the police toenforce the DPA.

An employer may require data from theemployee to the extent that this doesnot infringe his/her personal rights (e.g.privacy) and that the data provides theemployer with substantial informationconcerning the employment relationship.In these cases the employee’s impliedconsent (in practical terms, signing theemployment contract) is sufficient.The employee’s express consent isnecessary for the collection, use andstorage of personal data for otherpurposes. Consent in writing must beobtained for certain sensitive data suchas state of health, criminal records orTrade Union membership.

Although there is no requirement toobtain an employee’s consent to datahandling in writing, since the burden ofproof in data protection matters isgenerally on the employer, it is advisableto record the employee’s consent.

Data collection, use, storage orprocessing for purposes other than theproper exercise of rights and obligationsunder the employment contract mustcomply with the general rules of dataprotection set out in the DPA. In thesecases an employer may collect, use andstore the employee’s personal data withhis/her consent or if it is authorised bylaw to do so. Personal data may only becollected, used, stored and processedfor a defined purpose and in order toexercise rights and perform obligations.

Only personal data which isindispensable for the purpose of thedata collection, use, storage andprocessing may be used, and only tothe extent and for the period of timerequired for the accomplishment of suchpurpose.

Non-compliance with the dataprotection rules may result in a claim bythe employee for damages and anobligation to delete the employee’s datathat has been collected, used, stored orprocessed unlawfully. In certaincircumstances data handling contrary tothe DPA constitutes a criminal offence.

Financial institutions, telecommunicationservice providers and public utilitiesmust appoint an internal data protection“commissioner”, who is responsible forcompliance with the data protectionrules, and establishing internal dataprotection rules within the organisation.

14.2 Employee Access to DataEmployees have the general right toreceive information on the collection,use, storage or processing of their data.They are also entitled to request thecorrection or, in certain circumstances,the deletion of their data.

14.3 MonitoringThe employer has the right to monitorthe content of the hardware of theemployee’s computer if the computer isfor work-related use explicitly. As far as



94


e-mails are concerned, the employermust distinguish between e-mailaddresses for private purposescontaining the employee’s name andwork-related e-mail addresses notreferring to the employee. E-mails frome-mail addresses accessible by theemployee (and the system administrator)exclusively may only be monitored incompliance with the general rules ofdata protection.

The distinction between e-mailaddresses for work-related and privatepurposes applies to the use of theinternet. If the employer explicitly limitsinternet use for purposes connected tothe employee’s work, it may monitor theuse of internet provided that this wasnotified to the employees before themonitoring occurs.

The use of cameras for controllingemployees’ activities at work is subjectto the employees’ consent. Theemployer may use cameras in theabsence of the employees’ consentprovided that the individual employeesare not recognisable in the picturetransmitted by the cameras. In anyevent, employees must be notified of theexistence of cameras and advised onwhether the pictures are recorded orstored and for what purposes.

Monitoring private telephone usage, i.e.listing the numbers called by theemployee, irrespective of the employee’sconsent, is usually contrary to the DPAas the telephone number of the otherparty to the telephone conversationqualifies as a personal data and it isimpossible to obtain the other party’sconsent to list his/her telephone number.


Data transmission to third parties by theemployer is subject to the generalrequirements on handling theemployee’s personal data. Transfer ofdata to a country outside the EEA isprohibited unless that country ensuresan adequate level of protection ofpersonal data. These rules apply to thetransmission of the employee’s data tothe parent company.


95

Ireland1. IntroductionEmployment law in the Republic ofIreland is governed by common law,statutory provisions and a range offundamental rights enshrined in the Irishconstitution. In addition, EuropeanCommunity Directives and EuropeanCourt of Justice decisions apply to theemployment relationship.

There are two separate systems oflabour-related Tribunals; the LabourCourt whose principal function is toprovide conciliation facilities inconnection with trade union disputesbut also has jurisdiction under a numberof statutory provisions, and theEmployment Appeals Tribunal appointedby the Minister for Enterprise, Trade &Employment, which hears grievancesunder specific legislation such as thatrelating to unfair dismissal, minimumnotice, redundancy etc.

In addition, employees have accessdirectly to the Courts. The Courts have,in a series of employment related cases,granted injunctions restraining purportedtermination of contracts of employmentand also restraining internal disciplinaryprocedures on the basis that principlesof constitutional and natural justice arenot being observed. Such principles arefurther expanded by the EuropeanConvention on Human Rights Act, 2003.

2. Categories of Employees2.1 GeneralIrish labour law does not in generaldistinguish between different categoriesof employee within the private sector.Part-time employees are entitled to betreated no less favourably than full-timeemployees. Similarly, fixed-term employeesare entitled to be treated no lessfavourably than permanent employees.Certain statutory protections do notapply to employees in the public sector.

2.2 DirectorsDirectors who are office holders andemployees have exactly the sameentitlements as ordinary employees.Their rights and obligations as officeholders are governed by the provisionsof the Companies Acts.

3. Hiring3.1 RecruitmentThe Employment Equality Acts, 1998and 2004 (the “Equality Acts”)specifically prohibit discrimination in theareas of access to and conditions ofemployment, training, promotion andadvertising. Employers are advised toreview recruitment procedures, includingadvertising and interviewing techniques,to ensure that discrimination does notoccur.

Employers are not required to use stateunemployment offices and there are norecruitment quotas requiring employersto recruit from any particular groups.State employment offices and trainingcentres are run by An Foras AiseannaSaothair (FAS). They provide formalsources of recruitment for manual orsemi-skilled workers, but FAS claims todeal with only ten per cent of thevacancies arising annually. Privaterecruitment consultants are commonlyused for more senior positions.

3.2 Work PermitsAn employment permit is required forforeign nationals who are working in theRepublic of Ireland. An employmentpermit is issued by the Minister ofEnterprise, Trade and Employmentfollowing an application by theemploying company, or the foreignnational in prescribed circumstances.A foreign national may not make anapplication in respect of theiremployment in Ireland unless an offer ofemployment has been made in writingto them.

Employment permits are available foroccupations with an annual salary ofc30,000 or more and for a restrictednumber of occupations with salariesbelow c30,000. Certain jobs are strictlyineligible for work permits, regardless ofthe salary paid. Employment permits areinitially granted for a two year period.

When the application to the Minister ofEnterprise, Trade and Employment ismade by the relevant employer (asopposed to the foreign national), suchemployer must demonstrate that theyhave taken all steps as were reasonablyopen to them to offer the employment inquestion to an Irish or other EEA citizen.

In addition, the employer must provethat, at the time of the application, morethan 50 per cent of their employeeswere EEA citizens, or nationals of theSwiss Confederation. Refugees whocome within the criteria laid down in theRefugee Act, 1996 as amended areentitled to all employment rightsavailable to Irish citizens.

As an alternative to an employmentpermit, an employee may apply for aGreen Card, Spousal/Dependant WorkPermit or an Intra-Company Transfer.

4. DiscriminationThe Equality Acts prohibit discriminationon nine grounds, namely gender, maritalstatus, family status, sexual orientation,religious belief, age, disability, race andmembership of the Traveller community.Discrimination on grounds of genderand marital status has been prohibitedby statute since 1977 but the remaininggrounds are new.

The principle of equal treatment of menand women requires that they receiveequal pay for “like work” unless thedifference in pay is based on groundsunrelated to the employees’ gender.The Equality Acts extend this principle tothe new discriminatory grounds so thatdifferent rates of pay for like work mustbe justified on grounds other than thesegrounds.

The Equality Acts outlaw sexualharassment in the workplace. It isdefined as any form of unwanted verbal,non-verbal or physical conduct of asexual nature carried out by fellowemployees, customers or businesscontacts, being conduct which has thepurpose or effect of violating a person’sdignity and creating an intimidating,hostile, degrading, humiliating oroffensive environment for the person.Unwanted conduct may consist of acts,requests, spoken words, gestures or theproduction, display or circulation ofwritten words, pictures or other material.

The Equality Acts also outlaw non-sexual harassment in the workplace. It isdefined as any form of unwantedconduct related to any of thediscriminatory grounds carried out byfellow employees, customers or

Employment and Benefits in the European UnionIreland


96


business contacts, being conduct whichhas the purpose or effect of violating aperson’s dignity and creating anintimidating, hostile, degrading,humiliating or offensive environment forthe person. As with sexual harassment,unwanted conduct may consist of acts,requests, spoken words, gestures or theproduction, display or circulation ofwritten words, pictures or other material.

Employers are liable for acts of sexualand non-sexual harassment by theiremployees unless they can establishthat they took reasonable steps toensure that harassment did not occur.Complaints concerning discriminationwill be handled by the Director of theEquality Tribunal whose decisions maybe appealed to the Labour Court.Complainants may also refer claimsdirectly to the Circuit Court in certaincircumstances.


5.1 Freedom of ContractIn Ireland there is extensive freedom ofcontract between employer andemployee, with statute intervening onlyin limited circumstances. However, thecontract of employment must notcontain any provision which might becontrary to the Constitution, forexample, in certain circumstances, aterm purporting to prevent an individualfrom withdrawing labour may becontrary to the Constitution andconsequently void.

5.2 FormThere is no requirement for a contract ofemployment to be in writing, althoughunder the Terms of Employment(Information) Acts, 1994 and 2001(which implement Directive 91/533/EEC)employers are obliged to furnishemployees with a statement of the mainterms and conditions of theiremployment within two months ofcommencement. The requiredinformation includes the place of work,the duration of any temporary or fixed-term contract, the rate or method ofcalculation of remuneration, thefrequency of remuneration, any terms orconditions regarding hours of workincluding overtime, paid leave (other

than sick leave), incapacity to work dueto sickness or injury and paid sick leave.The statement should also specify theperiod of notice which the employeemust give and is entitled to receive toterminate the employment.

Contracts may be for a fixed or indefiniteterm, or for a specific purpose, e.g. thecompletion of a project where it is notpossible to predict the length of timerequired. Fixed-term or specifiedpurpose contracts may be drafted toexclude an employee’s right to bring anunfair dismissal claim on the expiry ofthe fixed-term or on the completion ofthe specified purpose. To avail of suchan exclusion, the contract should be inwriting, signed by both parties, andshould state that the Unfair DismissalsActs 1977 to 2001 shall not apply to adismissal which is due only to the expiryof the fixed-term or the cessor of thespecific purpose. Employers may not,however, use a series of fixed-term orspecified purpose contracts to depriveemployees of the protections availableunder the Unfair Dismissals Acts. Furtherlimitations on the use of fixed-termcontracts and further protections forfixed-term workers were introduced bythe Protection of Employees (Fixed-Term) Work Act, 2003 (whichimplements Directive 1999/70/EC).

5.3 Trial PeriodsTrial periods of up to 12 months fromthe commencement of the employmentmay be agreed between the parties,although in practice trial periods may bevery much shorter. Although it is not alegal requirement that they are agreed inwriting, in practice they are.


All employees are under an implied dutynot to enter into any business activitiesin competition with their employer, eitherduring or outside working hours. Inaddition, restrictive covenants prohibitingemployees from competing with thebusiness of their employer aftertermination of their employment areincluded in the contracts of many senioremployees. These will only be enforcedby a Court where they are to protect thelegitimate business interests of theemployer and are limited in time and

geographical area. A duty ofconfidentiality applies during theemployment relationship and after it hasterminated in relation to the employer’sbusiness.

5.5 Intellectual PropertyContractual provisions concerningproperty rights in inventions made byemployees are common, but in theabsence of an express provision theCourts will usually decide that aninvention made by an employee duringthe course of employment belongs tothe employer.

6. Pay and Benefits6.1 Basic PayThe National Minimum Wage Act, 2000introduced a statutory minimum wagewhich is currently c8.30 per hour.Certain industries have establishedminimum pay levels and employers insuch industries must give details of thepay level to employees. An employerwho pays less than the establishedminimum may be ordered to pay up tothree years’ arrears of wages due to theemployee. An employee may sue his orher employer if that employer fails to payhis or her basic salary and, if thepayment is governed by an EmploymentRegulation Order, the employer will beguilty of an offence under the IndustrialRelations Acts 1946-2004.

Legally binding agreements relating topay may be reached by one or moretrade unions and one or moreemployers through voluntary bodiesknown as Joint Industrial Councils(JICs). Such agreements apply to allindividual employees covered by JICsregardless of whether or not thoseemployees are union members.

There is no obligation on employers toindex link the salary they pay toemployees. However, it is commonpractice for employers to link salary toinflation. National wage agreementsbased on a partnership approachbetween Government, unions,employers and other interested groupsapply to many sectors and provide foragreed pay increases for the period ofthe wage agreement.


97

6.2 Private PensionsThe state pension scheme provides apension of 65 per cent of the nationalaverage earnings to individuals over 65who have made sufficient compulsorycontributions to the Social InsuranceFund. In addition, private pensionschemes are becoming more commonwith contributions made to anindependent employer-sponsored fundby both employers and employees. If aprivate scheme is approved under therelevant legislation, it may benefit fromvarious tax concessions, subject tocertain limits. Employers must offeraccess to a Personal RetirementSavings Account (PRSA) to “excludedemployees” such as those whoseemployer does not operate a privatepension scheme or where there is awaiting period of over six months to jointhe scheme.

6.3 Incentive SchemesIn the last ten years, the IrishGovernment has introduced taxlegislation to encourage employees toparticipate in the ownership of theiremployer company. There are no taxincentives to encourage employers tooperate commission or bonus schemes.

6.4 Fringe BenefitsIn many employment contracts, fringebenefits include payment of theemployee’s contributions to a voluntaryhealth insurance (VHI or other healthinsurance providers) scheme for theemployee and his or her dependants.For more senior positions the use of acar is frequently provided, but this issubject to income tax as a benefit inkind. (See also sickness benefits below).

6.5 DeductionsDeductions must be made from allemployee salaries and wages for incometax under the Pay As You Earn (PAYE)scheme, in respect of social insurancecontributions and to cover amountspayable under Court Orders. Otherdeductions can only be made afterobtaining the written consent of theemployee.

7. Social Security7.1 CoverageWith very few exceptions, the Irish socialsecurity system covers all employees in

the private sector who are over age 16and who earn c38 or more per week (aworker who earns less than c38 perweek is only covered for occupationalinjuries). The social security systemprovides for benefits to cover retirement,disability and survivors’ pensions,sickness, maternity, industrial injury,unemployment, disability, socialassistance and family allowances.

7.2 ContributionsContributions are generally made byboth employers and employees.Contributions are made as follows:

Employers PRSI

Salary less than c18,512 per annum 8.50 per cent

Salary greater than c18,512 per annum 10.75 per cent

Employees

The employees’ contributions are made up of PayRelated Social Insurance (“PRSI”) and levies

PRSI Four per cent payable on salary up toc44,180 per annum. The first c127 per week(non-cumulative) is disregarded

Levies Two per cent on all earnings excludingcertain share related benefits.

There is an Employer’s PRSI ExemptionScheme that exempts employers fromthe obligation of making contributionsfor the first two years in respect ofcertain additional full-time employeestaken on.

8. Hours of WorkUnder the Organisation of Working TimeAct, 1997 the maximum averageworking week is 48 hours, subject to aphase-in period. Hours may beaveraged over a period of two, four, sixor six to twelve months, depending onthe circumstances. The Act also requiresemployers to provide rest breaks toemployees. Employees have anentitlement to a 15 minute rest breakwhere up to four and a half hours havebeen worked and 30 minutes where upto six hours have been worked.These breaks may be varied either bycollective agreement (which must beapproved by the Labour Court) betweenthe employees’ representatives and theemployer or by Regulations madeapplicable to a particular sector. In suchcases, compensatory rest must beprovided.

Special provisions apply to nightworkers, i.e. those who work for at least

three hours between midnight and 7amand at least half of whose annualworking time is night work. Employersmust not permit night workers to workfor more than an average of eight hoursin any 24 hour period. The averagingperiod for night workers is two months(although longer periods are permitted incertain circumstances).

9. Holidays and Time Off9.1 HolidaysThere are nine public holidays, inrespect of which employees arepermitted at the option of the employerto (a) a paid day off on that day, (b) apaid day off within a month of that day,(c) an additional day of annual leave, or(d) an additional day’s pay. In addition,employees are entitled to a minimum of20 days’ holiday per year, although anemployee must have worked for aparticular employer for the full holidayyear in question to be entitled to the full20 days. Otherwise, holidays aregranted on a pro rata basis.

9.2 Family LeaveThe most important rights under theMaternity Protection Acts, 1994 and2004 are the right to return to work aftermaternity leave and the right toadditional maternity leave. Femaleemployees are entitled to attend ante-natal appointments during their workinghours and to take maternity leave of upto 42 weeks, provided the employer isgiven at least four weeks’ notice of thecommencement of such leave.The maternity leave must include atleast two weeks’ absence before thedate of the birth and at least four weeksafter. The State provides a maternityallowance of 80 per cent of theemployee’s gross earnings during thefirst 26 weeks’ leave, subject to amaximum level determined from time totime by the Government. The employeeis also entitled to take up to 16 weeks’additional maternity leave entirely at herown expense.

The Parental Leave Acts, 1998 and2006 give parents of children the right to14 weeks’ unpaid leave in respect ofeach such child. The leave must betaken before the child is eight years old(subject to modifications in the case ofan adopted child) and may be taken as



98


a continuous period, in portions or byworking reduced hours. While the leaveis unpaid, it is reckonable for thepurposes of employment rights.

Female employees, and in certain limitedcircumstances male employees, areentitled to take up to 40 weeks’adoptive leave. Adoptive benefit ispayable for the first 24 weeks.An employee may take an additional16 weeks’ leave during which no benefitis payable.

Employees may in limited circumstancestake up to 104 weeks’ unpaid leave ofabsence to care for an incapacitateddependent.

9.3 IllnessIn the absence of any express term in acontract of employment concerning acompany sick pay scheme or any termimplied as a result of custom andpractice, an employee has noentitlement to receive money from theemployer during any period of absencedue to sickness or injury. Thus, duringsuch periods of absence, the employeemust rely wholly upon social welfarebenefits.

Large undertakings usually provide forpayment of full wages for a limitedperiod (usually three or six months) ofabsence due to illness or injury, subjectto a refund to employers in respect ofthe state benefits received.

10. Health and Safety10.1 AccidentsAll employers are required to take stepsto ensure that their employees areworking in as safe an environment as isreasonably practicable. That standard“so far as is reasonably practicable” is ahigh threshold pursuant to the Safety,Health & Welfare at Work Act, 2005 (the“2005 Act”). Employees can bring civilclaims against their employers for anyloss suffered as a result of accidents atwork or industrial illnesses and alsoclaim compensation from the StateOccupational Injuries Benefit Scheme.

More recently, emphasis has beenplaced on protecting employees fromincurring non-physical illness at work.Liability arising from stress-induced

illness has been established andemployers are expected to takeappropriate steps to prevent any formsof harassment and bullying in theworkplace or any other forms of practicewhich may give rise to injury anddamage to an employee. There is nostatutory obligation on employers to beinsured against civil liability, althoughmost large undertakings are covered bysuch insurance.

A criminal offence is committed wherethe duties imposed by the varioussections of the 2005 Act are breached.Those offences can be divided into twoseparate sets, less serious offences forwhich the guilty person is liable onsummary conviction to a fine notexceeding c3,000, and the more seriousoffences for which, on summaryconviction, one can be liable to a finenot exceeding c3,000 and/orimprisonment for a term of up to sixmonths. For the more serious offencesupon conviction on indictment a personcan be liable to a fine of up toc3,000,000 and/or imprisonment for aterm of up to two years. The “moreserious offences” which attract the moresevere penalty include suchstraightforward duties as providinginformation to employees regardinghealth and safety pursuant to Section 9of the 2005 Act or providing instructiontraining and supervision to employeespursuant to Section 10 of the 2005 Act(i.e. it is not just contravention of themore obviously important duties whichcan attract the higher penalty).

Where an offence has been authorisedor consented to by a manager, or aperson who purports to act in such acapacity, then that person, as well asthe undertaking, shall be guilty of anoffence and shall be liable to beprosecuted.

10.2 Health and Safety ConsultationAn employer must provide information inrelation to Health and Safety toemployees and the SafetyRepresentative (if any) in a form, mannerand language that is understood byemployees.

An employer must consult withemployees, and take account of any

representations made by the employees,for the purpose of giving effect to theemployer’s statutory duties in respect ofsafety, health and welfare. As this ismandatory, some form of consultationmechanism must be provided (althoughsafety committees are not mandatory).The Health and Safety Authority hasissued guidelines on the effectiveness ofconsultation arrangements includingadvice on the selection of safetycommittees (where one is put in place).

The employees may, if they so wish,select a Safety Representative (or, byagreement with the employer, more thanone) from “amongst their number”. TheSafety Representative may consult with,and make representations to, theemployer on safety, health and welfarematters relating to the employees in theplace of work. The SafetyRepresentative has a number ofstatutory rights and powers including:

(a) the right to information from theemployer in connection with thesafety, health and welfare ofemployees;

(b) the right to make representations tothe employer as to safety, health andwelfare. The employer is required toconsider these and, wherenecessary, act on them. Therequirement to act onrepresentations from the SafetyRepresentative is more demandingthan would apply to representationsfrom other employees;

(c) the power to carry out generalinspections or investigate potentialhazards on notice to the employer.The employer cannot unreasonablywithhold permission for these;

(d) the Safety Representative must beinformed by the employer that aHSA Inspector has arrived at theplace of work and also has a right toaccompany the Inspector, unless theInspector is investigating a specificincident. The Safety Representativemay make oral or writtenrepresentations to an Inspector andis also entitled to receive advice andinformation from an Inspector;


99

(e) the Safety Representative is entitledto time off “as may be reasonable”,without loss of remuneration:

(i) acquire knowledge to carry outhis/her functions; and

(ii) to carry out his/her functions,e.g. conducting investigationsand inspections.

(f) the Safety Representative is to suffer“no disadvantage arising out of theperformance of his or her duties”;

(g) the right to investigate accidents anddangerous occurrences (providedthat it will not interfere with theperformance of another’s statutoryobligation).

The Health and Safety Guidelines statethat in most organisations a singleSafety Representative will be adequateto meet safety and health requirementsbut that, if an employer has differentlocations, a Safety Representative canbe appointed at each place of work.

Every employer must have a SafetyStatement in relation to every place ofwork. This is a statement based upon arisk assessment specifying how healthand safety should be managed.An exemption exists for employers whohave less than three employees if anapproved code of practice exists, and inthose situations compliance with thatapproved code of practice is sufficient.

10.3 MiscellaneousSmoking is banned in enclosedworkplaces by virtue of the PublicHealth (Tobacco) Act, 2002 as amended(the “2002 Act”). Any employer whoallows a contravention of theprohibitions or restrictions contained inthe 2002 Act will be guilty of an offenceunless they can show that they made allreasonable efforts to ensure compliancewith the provisions of the 2002 Act.

11. Industrial Relations11.1 Trade UnionsAll Irish workers have a right to jointogether and form trade unions.However, only those trade unions with1,000 or more members and on behalfof whom money has been deposited in

Court, are licensed to take part incollective bargaining. It is an offence fora union to enter into any sort ofnegotiations without such a licence,although groups of workers are legallyentitled to negotiate with their ownemployer. There is no legal obligation onan employer to recognise a trade union,and the post-entry closed shop hasbeen declared unconstitutional.The Labour Court has under theIndustrial Relations (Amendment) Act,2001 as amended been given power toadjudicate in industrial disputes and inlimited circumstances to issue bindingdeterminations where the normalvoluntary procedures have not resolvedthe issue in dispute. Trade unions maybe affiliated to the Irish Congress ofTrade Unions (ICTU).

The largest employers’ association is theIrish Business and Employers’Confederation (IBEC), which acts as acentral adviser to its members onmatters concerned with employer/unionrelations, but in general it will only takepart in collective negotiations whenrequested to do so by one of itsmembers.

Over the last decade, there has beenincreased co-operation and negotiationbetween the Government, trade unions,employers’ organisations and farmingorganisations. Together they haveagreed on the “Ten Year FrameworkSocial Partnership Agreement 2006-2015” called “Towards 2016”.The Programme includes a strategy ofsustaining economic growth andmaintaining high levels of employment.

11.2 Collective AgreementsCollective agreements are generally notlegally enforceable by the parties tothem. However, the terms of such anagreement may become incorporated ina contract of employment and hence,be enforceable by the employer againstthe employee or vice versa. Collectiveagreements in the more traditionalindustries tend to be negotiated on anindustry-wide basis but more recentlythe trend with established industries istowards collective bargaining at plantlevel.

11.3 Trade DisputesIrish workers have no statutory right tostrike or to take industrial action.However, the Supreme Court has heldthat there is an implied term to be readinto every contract of employment to theeffect that serving a strike notice notshorter than the contractual noticeperiod and taking action pursuant tosuch a notice is not a breach ofcontract. Prior to the introduction of theIndustrial Relations Act, 1990 there wassome debate as to whether a right tostrike should be included in it, butultimately that Act preserved the positionwhereby striking employees are grantedcertain immunities from liability whichthey might otherwise incur for action incontemplation of or in furtherance of atrade dispute. However, no immunity isgiven to employees acting in defiance ofa strike ballot or to an individualemployee who has failed to follow theproper procedures. In a measuredesigned to improve industrial relationsand to facilitate the resolution ofdisputes between unions andemployers, a code of practice wasintroduced. This recognises that theprimary responsibility for the resolutionof disputes lies with the parties involved,and it lays down an appropriate disputeresolution procedure.

There are also certain limitations to thecircumstances in which a Court willgrant an injunction to an employer toprevent a strike.


The Transnational Information andConsultation of Employees Act, 1996requires businesses with over onethousand employees in the EuropeanEconomic Area (which includes all EUstates, together with Norway, Icelandand Liechtenstein) and at least 150employees in each of two EEA states, toestablish procedures to inform andconsult employees in relation totransnational matters affecting thebusiness at EEA level. Employers arerequired, either on their own initiative orat the request of at least 100 employeesin at least two EEA states, to establish aSpecial Negotiating Body for thepurposes of negotiating agreedinformation and consultation



100


arrangements. Whilst the role of theWorks Council is limited, it does involvea new consultative process with workerrepresentation and is a new concept foremployers in non-unionised workplaces.

EU Directive 2002/14/EC (theInformation and Consultation Directive),which imposes further consultationobligations on businesses in Ireland withover 150 employees (100 by 2007 and50 by 2008), has been implemented inIrish law by the Employees (Provision ofInformation and Consultation) Act, 2006.

Where collective redundancies areproposed, the employer is obliged toconsult with the employeerepresentatives and notify the Ministerfor Enterprise, Trade and Employment;failure to do so may result in theemployer being fined after prosecutionby the Minister. There is a maximum fineof c1,904.61 on conviction for failure toeither consult employees or notify theMinister, or keep or produce appropriaterecords. However, fines can be up toc12,500.00 for failure to postponeimplementation of redundancies untilafter the expiry of at least 30 days afternotification to the Minister. Employees ortheir representatives may also refer theissue of non-consultation to a RightsCommissioner who may award up tofour weeks’ remuneration ascompensation.

Consultation obligations may also ariseunder existing Collective agreements orthe 2003 Regulations referred to insection 12 below.


12.1 GeneralThe European Communities (Protectionof Employees on Transfer ofUndertakings) Regulations, 2003 (the“2003 Regulations”) implemented the2001 EU Acquired Rights Directive(directive 2001/23/EC.) Upon a transferof a business or undertaking fallingwithin the 2003 Regulations, all rightsand obligations arising from contracts ofemployment as well as any rights undercollective agreements are automaticallytransferred to the transferee.The dismissal of employees by reason ofthe transfer is prohibited unless this is

done for “economic, technical ororganisational reasons entailing changesin the workforce”. The status andfunctions of existing employeerepresentatives are also preserved.


The transferor and transferee mustinform, and in certain circumstancesconsult with, the representatives of theiremployees that are affected by thetransfer. They should be informed ofwhen the transfer will take place, thereasons for the transfer, the implicationsthe transfer will have for the workforceand of any ’measures’ envisaged inrelation to the employees. This informationmust be given to the employees or theirrepresentatives, where reasonablypracticable, not later than 30 daysbefore the transfer occurs and in anyevent in ’good time’ before the transfer(which could be a period greater than30 days).

Where there are no employeerepresentatives the relevant employer(s)must put in place a procedure wherebyrepresentatives can be appointed.Time to appoint representatives needsto be factored into the timing of anytransaction.

These information and consultationobligations apply to all transfers to whichthe 2003 Regulations apply regardlessof the number of employees involved.Where the transferor or the transfereeenvisage any ’measures’ in relation tothe employees (e.g. a change to theemployees’ work practices, worklocation, redundancies) the employees’representatives must be consulted witha view to reaching an agreement.Provided that there has been meaningfulconsultation there is no obligation toactually reach an agreement. Although atransaction to which the 2003Regulations apply should not becompleted unless the information andconsultation process has been initiatedand completed beforehand, thetransaction documents can be signed.

12.3 Notification of AuthoritiesThere is no general obligation to notifythe authorities about a transfer or itsconsequences; however certain

regulated industries (i.e. financialservices) may be required to notify therelevant regulatory authorities (i.e. theIrish Financial Services RegulatoryAuthority).

12.4 LiabilitiesA complaint of a contravention of theinformation and consultation provisionsunder the 2003 Regulations may bereferred to a Rights Commissioner atfirst instance. If he upholds anycomplaint, the Rights Commissionermay require the employer to pay to eachemployee compensation not exceedingfour weeks’ remuneration for a breach ofthe notification and consultationobligations and not exceeding twoyears’ remuneration for a breach of anyother provisions of the 2003Regulations.

A Rights Commissioner is also able togrant relief analogous to injunctive reliefand in addition, it is possible to obtainan injunction from the courts, particularlyin cases where time is of the essence.The decision of a Rights Commissionermay be appealed to the EmploymentAppeals Tribunal. If the employer fails tocarry out a decision, an application canbe made to the Circuit Court to seek anorder directing the employer to comply.

13. Termination13.1 Individual TerminationUnder the Unfair Dismissals Acts, 1977to 2005 (the “Unfair Dismissals Acts”)an employee who has worked for morethan one year is entitled to rely on thelegislation to challenge a dismissal.Under the Unfair Dismissals Acts, adismissal is deemed to be unfair and theonus is on the employer to establishotherwise.

13.2 NoticeIn cases other than gross misconduct,(when the employer is entitled toterminate without notice), an indefinitecontract may be terminated by notice.The following minimum statutory noticeperiods apply to all employees who havecompleted 13 weeks of continuousservice with the employer:


101

Period of Employment Notice

13 weeks – 2 years 1 week

2 years – 5 years 2 weeks



15 years or more 8 weeks

Individual contracts may provide forlonger notice periods and often do so inthe case of senior executives.Notice may be oral, although collectiveagreements may stipulate that it be inwriting. Any dismissed employee isentitled to require the employer tosupply a written statement of thereasons for dismissal within 14 days.After the initial 13 weeks of employment,an employee must give one week’snotice of his or her intention to resign.

A former employee who has beendismissed without proper notice beinggiven can claim salary (and loss of otherbenefits) in lieu of notice.

Claims of unfair dismissal are normallyheard by the Employment AppealsTribunal (EAT) and must be made withinsix months of the date of dismissal; thisdeadline may be extended by theTribunal to a maximum of 12 months incertain circumstances. If both partiesagree, the claim can be heard moreinformally by a Rights Commissionerwhose Recommendation may beappealed to the EAT. The remedy whichmay be sought or awarded in the caseof unfair dismissal is reinstatement, re-engagement or compensation of up to amaximum of two years’ remuneration.Determinations of the EAT are subject toappeal to the Circuit Court whosedecision may be further appealed to theHigh Court; appeals in both Circuit andHigh Courts are by way of full re-hearings. Failure by the employer toimplement a Determination of the EATwithin six weeks may result inproceedings by the Minister forEnterprise, Trade and Employment in theCircuit Court to enforce the remedyawarded by the Court.

Employees may also apply to the Courtsdirectly claiming wrongful termination oftheir contract of employment and applyto the Courts for injunctions restrainingthe purported termination.

13.3 Reasons for dismissalDismissals may be justified on one of anumber of grounds, including theemployee’s competence, capability,conduct or redundancy. In addition todemonstrating that there weresubstantial grounds justifying thedismissal, the employer must show thathe or she acted reasonably in effectingthe dismissal. Therefore, an employerconsidering dismissal for poorperformance should apply fairprocedures such as notifying theemployee of the dissatisfaction andaffording an opportunity to improvebefore effecting the dismissal. In aredundancy situation, the employer mustshow not only that a genuineredundancy situation existed, but alsothat the employee was fairly selected forredundancy.

Employees must be informed about thedisciplinary procedures in force at theirworkplace and should be notified of anychanges. In the event that no suchprocedure exists, the employer mustnevertheless properly investigate anyalleged breaches of working practicesand the employer may suspend anemployee on full pay during such aninvestigation. The procedures followedby an employer may be important whendeciding whether a particular dismissalwas fair or not.

13.4 Special ProtectionDismissals which are connected withpregnancy, religion, politics, race, colour,sexual orientation, age, membership ofthe travelling community or trade unionmembership are automatically unfair.Selective dismissals of employees onstrike are also unfair.

13.5 Closures and Collective DismissalsAs mentioned above, redundancy is apermissible reason for individualtermination. However, it is frequentlyassociated with plant closure andcollective dismissals.

Where an employer closes a workplaceor work of a particular kind is no longerneeded, the affected employees whohave worked for that employer for aminimum of two years and who areunder 66 years of age are entitled tostatutory redundancy payments

calculated according to their age, lengthof service, and rate of pay. Entitlementto such a payment may be lost if theemployee refuses an offer of suitablealternative employment. The employercan generally claim a rebate from theIrish Government of 60 per cent of anystatutory redundancy payment.Disputes arising as to entitlement to aredundancy payment are referred to theEmployment Appeals Tribunal.An employee who is to be maderedundant is entitled to reasonable paidtime off during the last two weeks of thenotice period in order to look foralternative work or attend trainingsessions.

Depending on the numbers ofredundancies involved (in relation to thetotal workforce of the undertaking),employers may be under a duty toinform the Minister for Enterprise,Trade and Employment before makingcollective redundancies and to notifyand consult any employeerepresentatives. (See section 11.4 onInformation, Consultation andParticipation).

14. Data Protection14.1 Employment RecordsEmployers’ data protection obligationsare set out in the Data Protection Acts,1988 and 2003 (“the Acts”); The DataProtection (Amendment) Act, 2003implements the European DataProtection Directive 95/46/EC. The Actsregulate how employers collect, storeand use personal data held by themabout their employees (past, prospectiveand current). More onerous obligationsare imposed in respect of sensitivepersonal data. Infringement of the Actscan lead to investigation by the DataProtection Commissioner, fines of up toc100,000 or compensation claims fromaffected employees.

Employers, as data controllers, mustensure that personal data about theiremployees is collected and processedfairly, is kept accurate and up-to-dateand is not kept for longer thannecessary. Appropriate securitymeasures must be taken by employersagainst unauthorised access to, oralteration, disclosure or destruction of,personal data.



102


Employers should have a dataprotection policy in place including adata protection notice, a defined policyon retention periods for all items ofpersonal data and provide appropriatestaff training in data protection.

14.2 Employee Access to DataEmployees, as data subjects, have theright to make a subject access request.This entitles them, subject to certainlimited exceptions, to be informed whatpersonal data is held about them and towhom it is disclosed, to obtain a copy oftheir personal data and have personaldata amended or deleted where it isincorrect. Employers should respond tosubject access requests as soon aspossible or within 40 days from receiptof the written request. Subject accessrequests cover personal data held inelectronic form and in manual form(provided it is held in a “relevant filingsystem” as defined by the Acts).Employers may charge up to c6.35 forsupplying employees with a copy of theirpersonal data.

14.3 MonitoringAs a result of the electronic workplaceorganisations commonly have a generalcommunications policy which in certaininstances confers a right on theemployer to monitor employeecommunications. Such policies apply toall employees including those who travelon business with PCs, laptops and e-workers who work from home.

All monitoring of employee e-mail,internet and telephone use and closecircuit TV monitoring is subject tocompliance with the Acts. Certain typesof monitoring may also be caught by thePostal and Telecommunications ServicesAct, 1983 (as amended by theInterception of Postal Packets andTelecommunications Messages(Regulation) Act 1993) (the “1983 Act”)and the EC (Electronic Communicationsnetworks and Services) (Data Protectionand Privacy) Regulations, 2003 (the“2003 Regulations”). Section 98 of the1983 Act makes it an offence tointercept (i.e. listen to or record) anytelecoms message in the course oftransmission unless either the sender orrecipient has consented to such listeningor recording.

On the other hand, if an employerwishes to monitor stored informationsuch as voicemails and e-mails, the Actsand the 2003 Regulations will apply.Express employee consent is notrequired provided the employee isnotified that this form of monitoring maybe carried out as well as the purpose forwhich it may be carried out and theparties to whom the stored informationmay be disclosed. The Data ProtectionCommissioner has issued guidelines inrelation to employee monitoring, theguiding principle being that any limitationof the employee’s right to privacy shouldbe proportionate to the likely damage tothe employer’s legitimate interests.


Employers should not provide employeedata to third parties otherwise than inaccordance with the principles andprocessing conditions set out in theData Protection Acts, 1988 and 2003.It may be necessary to obtain expressconsent from the employee to suchdisclosure in the absence of a legitimatebusiness purpose for the disclosure anddepending on the nature of theinformation and the location of the thirdparty. Where the data is beingtransferred to a third party within theEEA a written contract should beentered into whereby the recipientagrees to process the data inaccordance with the instructions of thetransferor and comply with the securityobligations set out in the Acts. Wherethe third party is based outside the EEAthe Acts prohibit the transfer of dataunless that country ensures an adequatelevel of protection for personal data orone of a series of limited exceptionsapply. Where employee data isrequested in the context of acommercial transaction anonymiseddata should be provided where possible.If this is not possible the recipient shouldbe required to undertake in writing that itwill only use the information in respect ofthe transaction in question, will keep itsecure and will return or destroy it at theend of the transaction.


103

Italy1. IntroductionEmployment relationships are regulatedby the Constitution, the Civil Code, theWorkers’ Bill of Rights (Law No.300/1970, namely Statuto deiLavoratori) and other Acts of Parliamentand Decrees. The Constitution providesfor the general rights of employeeswhereas the Civil Code and other lawsset out a detailed body of rulesgoverning employment relationships.

In addition to statutory provisions, termsand conditions of employment are fixedby the national collective labouragreements (contratti collettivi nazionalidi lavoro) applicable to employees inparticular industries. In principle, suchagreements are private contracts and,as such, bind only employers that aremember of employers’ associations andemployees who are union members.In practice, however, case law indicatesthey will apply to almost all employersand employees (whether union membersor not), since Italian Courts have inseveral instances ruled that suchagreements provide a minimum level ofwages and other benefits. Somecollective labour agreements have in thepast been codified into legislation andtherefore made applicable to allemployees concerned. An importantmulti-industry agreement was signed inJuly 1993 between the Government,Confindustria (see below) and the mainunions; it provides a new framework forindustrial relations and wage bargaining.

Contratti integrativi aziendali areagreements which supplement atundertaking level national collectivelabour agreements and which areconcluded between employer andemployee representatives.

No proceedings can be issued in alabour Court until an application hasbeen made for a conciliation procedure,to be held in the district of the place ofwork. Only after the conciliation attemptor sixty days after such application, mayeither party issue legal proceedings.

Individual labour disputes are heard atfirst instance by the local Tribunale (and

the trial is before a one-man labourCourt). Hearings are usually held within ashort period of time after the filing of theclaim. Compliance with an order of theTribunale cannot be delayed by theemployer lodging an appeal. Appealsare brought to the Corte d’Appello and,in the last instance, to the SupremeCourt (Corte di Cassazione) which ruleson points of law only. Alternatively,disputes can be brought beforeArbitration Tribunals as provided in thenational collective labour agreements.

Legislative Decree No. 276/2003(amended by recent Legislative DecreeNo. 251/2004) provides for an extensivereform of Italian Labour Law. The reformapplies to private sector businesses, andprovides new regulations aimed atincreasing modernisation and flexibility invarious areas of Italian labour law, suchas recruitment, part-time work, andtransfers of businesses. Amongst thechanges introduced are, for the first time,the definition and regulation ofsecondees and a requirement that, in theevent of a change to a worker’s duties,the worker’s prior consent is necessary.

The reform also introduces newcategories of employment relationships,e.g.: “job-on-call”, “job sharing”,“occasional jobs”, and self-employmentcontracts for special projects. Job-on-callis a work contract, which allows anemployer to have a worker available fornon-continuous or intermittent work,within the limits and terms set out incollective labour agreements. Job sharingis a special employment contract bywhich two employees jointly undertakeresponsibility for one single workobligation. An “occasional job” is definedas work performed for an “employer”where the aggregate remuneration fromthe employer does not exceed Euro5,000 per calendar year.

These reforms have also introduced asystem of certification for employmentcontracts, aimed at reducing disputes inrelation to the nature of the actualemployment relationships. Thecertification procedure is invoked by theparties to the contract on a voluntarybasis. The certification commission willthen ascertain the nature of theemployment relationship.

In addition open-term staff leasing isnow allowed, rendering it permissible toborrow from ad hoc authorised entitiessuch employees as are necessary to runa department or a branch of theborrowing company where there aretechnical and organisational needs fordoing so.


2.1 GeneralBoth Italian law and collectiveagreements separate employees intovarious categories. The three basiccategories are:

■ blue collar employees (operai);

■ white collar employees (two grades:impiegati and quadri); and

■ executive employees (dirigenti).

The categorisations are important notonly as legal concepts but in a practicalsense too; promotion from one categoryto another is seen as a major event inan employee’s career.

2.2 DirectorsDirectors of companies with delegatedpowers are traditionally considered self-employed. However, the general reformof pension legislation introduced in thelatter part of 1995 resulted in a socialsecurity contribution charge ondirectors’ fees, expressed as apercentage of income, and recentlegislation has amended the fiscaltreatment of directors’ fees.

2.3 OtherPart-time employees have fullemployment protection, priorityapplication for full-time posts andcollective bargaining rights over hours ofwork. Other specific provisions apply toseasonal employees in certain industriesand in relation to fixed-term contracts.The recent legislative reforms aim toencourage part-time working and to thisend a greater flexibility in part-timeworking hours and overtime is nowallowed.

3. Hiring3.1 RecruitmentCompulsory recruitment through

Employment and Benefits in the European UnionItaly


104


Government employment offices hasbeen abolished and recruitment throughauthorised private companies is nowallowed for all types of employees.The recruitment system has beenreformed by giving private bodies amore extended role and by providing foran IT database, which will becontinuously updated with data on thesupply and demand of manpower.Companies are now allowed to engageemployees provided by another entityfor fixed or indefinite periods.However, undertakings with more than15 employees are required to recruitfixed quotas of their labour force fromspecial lists of “protected categories”like refugees and disabled persons and,in some cases, widows and orphans.

Some social security contributionadvantages (including lower rates ofsocial security contributions) areavailable to employers that hire workersfrom special lists of unemployed people(such as people who have beendismissed following collective dismissalprocedures).

Employers are prohibited frominvestigating or asking any questionsabout an applicant’s political beliefs orlabour union membership or activities.These rules are in addition to thoserelating to discrimination (see furtherbelow).

Recent legislation permits companies totake on temporary employees throughagencies. National collective labouragreements impose limits on whatproportion of the firm’s workforce maybe temporary. The Ministry ofEmployment authorises the agencies,which must also be registered.Companies that apply for authorisationwill be examined under several criteria:they must, for example, have a minimumpaid-up capital and hold adequatedeposits with a credit institution.The employment relationship is with theagency which pays the employee’ssalary and social security contributionsand retains disciplinary power. Thecompany using the agency employeeremains nonetheless liable for anyunpaid salary and social securitycontributions and for workplace safetyand health.

3.2 Work PermitsWork permits are required for non-EEAnationals and must be obtained beforethe employee enters Italy by applying tothe appropriate Provincial Labour Office.Work permits are issued subject to anumerical cap established each year byGovernment Decree. All foreign nationalsmust obtain a residence permit from thepolice authorities within eight days ofarrival.

Employers are liable if they employworkers who have not complied withresidence permit regulations.

4. DiscriminationDirect and indirect discrimination on thegrounds of gender, race, disability, age,language, religious belief, political ortrade union affiliation, sexual orientationand personal beliefs is prohibited. Thedismissal of a woman (and in certaincases a man) within one year ofmarriage is void, unless the employerproves that it was for lawful cause(unconnected with the marriage).

There is a right to freely express anyopinion at the workplace.

All contracts of employment mustprovide for equal pay for men andwomen for work of equal value.

The definitions of direct and indirectdiscrimination correspond with those setout in Directives No. 2000/43/EC and2000/78/EC, as follows:

■ “direct discrimination” shall be takento occur when one person is treatedless favourably than another or hasbeen or would be treated in acomparable situation on the groundsof his/her religion, belief, disability,age, sexual orientation, race, ethicorigin;

■ “indirect discrimination” shall betaken to occur when an apparentlyneutral provision, criterion or practicewould put persons having aparticular religion, belief, disability,age, sexual orientation, race, ethnicorigin at a disadvantage.

The discrimination laws are, in principle,monitored and enforced by the National

Commission for Equal Treatment andEqual Opportunities. Regional EqualityCounsellors may bring discriminationcases against employers.


5.1 Freedom of ContractIndividual contracts of employment(contratti individuali) and supplementalagreements at company level (contrattiintegrativi aziendali) cannot derogatefrom the provisions of the law andcollective agreements (contratti collettivinazionali di lavoro) to the detriment ofthe employee. Because of detailedlabour laws and collective agreements,often very little is left for individualcontracts to cover other thanimprovements in basic economic terms.

5.2 FormThere is no general requirement that acontract of employment be in writing.However, most collective agreementsrequire the contracts of employment towhich they apply to be in writing. Allemployers must display a copy of thedisciplinary rules and sanctions applyingto all employees at the workplace. Part-time, fixed-term contracts andprobationary period covenants must allbe in writing.

Legislation implementing EU directive91/533 imposes a duty on the employerto provide a notice to all new employeeswithin thirty days of appointment, settingout the parties to the employmentcontract, the place of work, the startdate, the duration of the contract and ofany trial period, the employee’s grade,salary, holiday entitlement, hours ofwork, and notice periods. Subsequentchanges, whether arising out oflegislation or changes to the applicablecollective agreement must be notified tothe employee within a month of theirbecoming applicable to the employee.Otherwise, the employee may submit anapplication to the local labour officerequesting that the employer providedetails of the changes within fifteendays; and if the employer still does not,it may be fined.

Written contracts are required for fixed-term and part-time employment. Fixed-term contracts can only be concluded if


105

there is an objective reason for doing soderived from technical, production ororganisational needs, or to temporarilyreplace workers. Fixed-term contractsare prohibited in some cases (e.g. tosubstitute workers on strike). Suchcontracts must be for set periods only(for instance, 18 months for training).In some circumstances, the contractmay be renewed once, for a maximumcumulative term (including the originalterm) not in excess of three years.

5.3 Trial PeriodAny agreement for a probationary periodmust be in writing. During this period,either party may terminate theagreement without giving notice (on thebasis that the trial was not satisfactory);a termination payment will, however, stillbe due. Collective agreements lay downmaximum probationary periods, whichrange from one to six months.


An employee may not carry on businessin competition with his or her employeror work for a competitor, divulgeconfidential or secret informationconcerning the undertaking or theproduction methods of the employer, orutilise such information so as to causeprejudice to the employer.

The non-competition obligation is limitedto the carrying out of activities in thesame field of business in which theemployer operates. It applies only duringthe employment contract and does notsurvive thereafter unless a specific non-competition agreement is entered intobetween the parties. Such non-competition agreement is onlyenforceable under the followingconditions:

■ if it is agreed in writing;

■ if compensation for the employee isprovided for; and

■ if the limitation on the formeremployee’s activities is reasonable asto activity, duration (in any case, theduration cannot be more than fiveyears for dirigenti and three years forall other employees) andgeographical limit.

5.5 Intellectual PropertyInventions made by an employee in thecourse of employment belong to theemployer where their creation isanticipated by the employment contractand special provision has been made.If not, and the invention is made whileperforming the contract, the employee isentitled to a bonus in proportion to theimportance of the invention. In the eventthat the invention is made outside thescope of the employment and relates tothe activities of the employer, theemployer has a preferential right overthe invention. In all cases the employeeretains a moral right to be regarded asthe inventor.

6. Pay and Benefits6.1 Basic PayThere is no minimum wage as such, butthe Italian Constitution guarantees theright to fair pay. Collective agreementsprovide minimum levels of wages andbenefits. A Court can order an increasewhere pay is insufficient and generallythe standard reference is the nationalcollective labour agreement.

Wages are normally paid in 12 monthlyinstalments with a 13th instalment paidin December. Some collectiveagreements provide for a 14thinstalment at other times, usually tocoincide with holidays.

The multi-industry agreement of 1993provides that the parties shall negotiatesalary increases every two years, takingthe rate of inflation into account. Salariescan no longer be automatically index-linked to the cost of living.

6.2 Private PensionsBecause of extensive and compulsorystate benefits, private pensions havebeen rare. They are sometimes providedby the financial services sector andItalian subsidiaries of internationalcompanies (usually only for executives).The general reform of pensions hasresulted in the introduction of privatepension schemes which arecomplementary to the state scheme.Further reforms are anticipated.

6.3 Incentive SchemesNo official measures have been taken toencourage share participation apart from

a specific tax relief on share options incertain areas: the revenue is subject totax as capital gains and not asemployment compensation.

6.4 Fringe BenefitsItalian managers enjoy relatively highremuneration as well as, in certaincases, fringe benefits such as companycars, low interest loans, mobiletelephones, etc.

Other employees enjoy fringe benefitssuch as cafeteria or restaurant tickets,private supplementary insurance, etc.

6.5 DeductionsThe employer is required to withholdincome tax on behalf of the employeeand to pay such tax to the authorities ona monthly basis.

7. Social Security7.1 CoverageThe Italian social security system iscompulsory and provides acomprehensive set of benefits for allemployees. The general programmesare administered by the National SocialSecurity Institute (Instituto Nazionale diPrevidenza Sociale – INPS) as set out inthe relevant collective agreements.

7.2 ContributionsThe system is financed by employeeand employer contributions which varyaccording to the category of employeeand are calculated on gross earnings.Employee contributions are deductedfrom earnings at source by theemployer, who then passes them to therelevant authorities. The amount of thecontributions vary but are around eight-nine per cent for employees and sevenper cent for managers. The cost foremployers is high, ranging from 30 percent to 36 per cent of the salary in mostcases.

8. Hours of WorkNormal working hours are generally fixedat 40 hours a week. Collective labouragreements may establish a shorterworking week. There is no maximumlimit on daily working hours, however,average working hours cannot exceed48 hours, including overtime, in anyseven-day period. The average workingtime must be calculated using a



106


maximum reference period of fourmonths (NCLAs may increase thereference period to six or 12 monthswhere there are objective, technical ororganisational reasons for doing so).

Generally, the overtime limit allowed bylaw is eight hours a week. In theabsence of limits being established bycollective labour agreements, it isnecessary for individual agreementbetween the employer and eachemployee. In any event overtime cannotexceed 250 hours per year.

The rate of pay for overtime, night workand holiday work must be higher thanfor work during normal hours. Overtimerates range from an additional 20-30 percent for night work to an additional 50-70 per cent for work performed on apublic holiday. The rates are set bycollective agreement. Managerialemployees are not entitled to extra payfor overtime.

9. Holidays and Time Off9.1 HolidaysEach town has a holiday on the day ofits patron Saint and, in addition, thereare ten religious and national holidays.

The Constitution establishes a right toone day of rest a week (usually taken onSunday) and a right to annual holiday.

The law provides for a minimum annualholiday entitlement of four weeks withfull pay. Having regard to this four weekentitlement the employer may not makepayments in lieu of accrued but untakenholidays except on termination of theemployment relationship.

More generous arrangements can beagreed by collective labour agreements;in such cases it is possible to agree thatthe employer may make payments inlieu of accrued but untaken holiday.

9.2 Family LeaveAn employee is entitled to 15 days’leave at normal pay on marriage as wellas occasional days off for familyresponsibilities (such as the death of arelative or child’s sickness).

Legislation provides that a woman musttake maternity leave in the two monthsbefore delivery and three monthsthereafter (or, if she prefers and herhealth situation is good, in the onemonth before delivery and four monthsthereafter). During this period she isentitled to maternity pay equal to 80 percent of normal pay which is paid by thesocial security system. In somecircumstances, the father is also entitledto take three months’ leave from thechild’s date of birth.

A woman or her husband may elect totake a further ten months’ leave, partlypaid. During the parental leave period,the rate of pay is 30 per cent of normalpay for a period of six months inaggregate up to the child’s thirdbirthday. Thereafter, until the child’seighth birthday, pay during parentalleave is 30 per cent of normal pay if theindividual’s revenue is below a specificthreshold. Exercising this leaveentitlement does not affect the worker’sright to resume her/his employment. Inthe first year following the birth of thechild, the mother (or, in some cases, thefather) is entitled to break from work fortwo hours each day in order to nursethe child (if more than one child wasborn, four hours break may be taken).

9.3 IllnessAn employee who is sick has a right toretain his or her position, seniority and,generally, regular pay for a period up tosix months or more, depending on theprovisions of the applicable collectiveagreement. The social security systemcovers part of the salary.

If employers require employees toundergo medical examinations to testtheir aptitude for the job or their fitnessfollowing sickness or accident, suchmedical check-ups must be carried outby the national health service.

10. Health and Safety10.1 AccidentsEmployers have a duty to ensure safetyat work, and may incur penal sanctionsin the event of negligence. Insuranceagainst accidents at work is compulsoryand is managed by a state agency.

10.2 Health and Safety ConsultationThe law gives employees and theirrepresentatives the right to control theimplementation of health and safetystandards. In practice, this often meansthat union organisations at undertakinglevel (RSUs – see below) will exercisetheir right to consultation on thepromotion of health and safety at work.Formal inspection rights are only grantedto the National Health Service.

11. Industrial Relations11.1 Trade UnionsEmployees have the right to join and beactive in trade unions. Around 40-50 percent of the Italian workforce isunionised. The general right to associateis contained in the Constitution withlegislation giving specific rights, such aspaid and unpaid time off work forofficials to carry out union duties. Unionofficials have the right to post notices,collect funds and, in large undertakings,to use the undertaking’s premises forunion activities. There are strictregulations preventing employers fromdismissing or transferring union officials.Employers cannot, financially orotherwise, support any trade union.

Employers not complying with an orderto cease anti-union activity may be liableto penal sanction.

Unions are often organised on politicallines but form alliances for the purposeof collective bargaining at various levels.The national confederations reflectpolitical orientation as well. The largestorganisations are:

■ CGIL (Confederazione GeneraleItaliana Lavoratori);

■ CISL (Confederazione ItalianaSindacati Lavoratori);

■ UIL (Unione Italiana del Lavoro).

■ Dirigenti are represented by theFNDAI Union in the industrial sectorand by FENDAC in the commercialsector.

The main industrial employer’sconfederation is Confindustria. Thecommercial equivalent isConfcommercio.


107

11.2 Collective AgreementsThe most important level of collectivebargaining is that which sets nationalindustry-wide agreements.Such agreements are negotiated by thetrade unions representing the employeesconcerned on one side and theassociation of the employers in theparticular industry on the other.

11.3 Trade DisputesThe right to strike is enshrined in theConstitution, although restricted in somepublic services and essential supplyindustries. Industrial action short of astrike is prohibited. There is no lawwhich governs the right to strike ingeneral, with the exception of a statuteregulating strikes in public and other“essential” services.


Italian unions generally believe incollective bargaining as the preferredmethod for regulating industrial relationsand, for that reason, tend to disapproveof other methods for consultation andparticipation. Employees are alsorepresented by committees organised atcompany level. The most important formof employee representation is therappresentanze sindacali unitarie (RSU).This is a works council which may beelected to represent the interests of thenational trade union with which theemployer has concluded a collectiveagreement. The number of workscouncil members will depend on thenumber of employees at theestablishment. Where they exist, theyhave the power to conclude collectivelabour agreements at company level aswell as having various information andconsultation rights. Members of suchcommittees have the right to time off forthe performance of their duties.There are also procedures for creatingjoint committees where the employeroperates from more than oneestablishment. Employees are entitled toconsult the representatives ofrecognised unions whenever theydisagree with their employer’s decisions.


12.1 GeneralIn the event of a transfer of an

undertaking, or of a part of undertaking,the employment contracts areautomatically transferred to thetransferee and the employees maintaintheir respective seniority and the positionthat they have acquired during theiremployment with the transferor.

Employees whose employmentconditions undergo significant changesduring the three month period followinga transfer of an undertaking may resignand claim notice compensation. Underthe terms of their national collectiveagreement Dirigenti in variouscommercial sectors have the right toresign within 180 days of a change inownership and to claim an indemnity.The level of indemnity is set out in therelevant national collective agreementand will typically amount to a sum equalto part or all of their notice entitlement.

Following the transfer, the transfereemust continue to observe the terms andconditions under any collectiveagreement applied by the transferor atthe date of the transfer and on the sameterms, until the date of expiry of suchcollective agreement or the entry intoforce or application of another collectiveagreement of the same level.


If the transferor employs, in total (i.e.irrespective of the number of employeeswho are actually transferred) more than 15employees, both transferor and transfereeof the undertaking must carry out aninformation procedure at a local level priorto the execution of any bindingagreement. This must take place at least25 days before the deed effecting thetransfer is executed or, if earlier, before abinding agreement between the parties isreached. Both the transferor and thetransferee must inform the representativesof workers in the undertaking, and therelevant trade unions of (a) the reasons forthe transfer; (b) the legal, economic andsocial implications of the transfer as theyaffect the employees; (c) the measuresenvisaged in relation to the employees (ifredundancies are contemplated, thisinformation must be disclosed, and acollective dismissal procedure could berequired); and (d) the date of theenvisaged transfer.

If there is a European Works Councils,information must be provided inaccordance with establishedprocedures.

Within seven days of receiving theinformation outlined above, the workers’representatives and trade unions areentitled to request a consultationmeeting. Consultation must commencewithin seven days of receipt of such arequest. The procedure is deemedcomplete 10 days after thecommencement of the consultationsregardless of whether the partiesreached agreement on the transfer.

12.3 Notification of authoritiesThere is no obligation to supplyinformation and/or consult or negotiatewith any public authorities in relation tothe transfer of an undertaking.

12.4 LiabilitiesFailure by the transferor and thetransferee to comply with theinformation and consultation obligationsconstitutes an unfair union practice, inbreach of the Workers’ Bill of Rights. Inthe case of such a breach the tradeunion can seek a court injunctionordering the employer to cease suchbreaches.

An employer that fails to comply with aninjunction (or subsequent appealdecision) will be liable to criminalsanctions (i.e. imprisonment for up tothree months or a fine of up to Euro206). It is generally very rare forimprisonment to arise.

According to recent case law the validityof a transfer agreement will not beaffected by a failure to comply withinformation and consultation obligations.This contrasts with earlier courtdecisions to the effect that a failure toinform and consult renders a transferagreement either null and void orwithout legal effect in relation to theemployees until theinformation/consultation procedure iscompleted. There is no obligation toobtain consent to a transfer from tradeunions and/or workers’ representatives,and they have no right of veto.



108


The seller and the buyer are jointly liablefor all the employees’ rights at the date ofthe transfer. The Italian Civil Code, asamended by recent Legislative DecreeNo. 251/2004, states that if a transfer ofan undertaking is followed by a supplycontract between the seller (as principal)and the buyer (as contractor) to beperformed using the undertakings (or partof an undertaking) transferred, for a periodof one year following the transfer a claimmay be brought against the seller as wellas the buyer, by the employees forpayment of salary allowances and socialsecurity contributions owed to them(unless this liability is expressly excluded inthe relevant national collective agreement).

In addition to the minimum legalobligations set out above, morefavourable provisions may be containedin any applicable collective agreements.

13. Termination13.1 NoticeBoth parties can terminate a contract(other than a fixed-term contract) bygiving due notice, but termination by theemployer is generally possible only if it isfor just cause or justified reasons(see 13.2).

Notice periods are regulated bycollective agreements (and to a lesserextent by individual contracts) byreference to service and grade.They tend to range from approximatelytwo weeks for blue collar workers tothree months for senior managers or upto 12 months for executives.

Failure of either employer or employeeto give proper notice will make thedefaulting party liable to paycompensation to the other party of asum equal to the pay due to theemployee for the notice period.

13.2 Reasons for DismissalDismissal by the employer generally hasto be for just cause (giusta causa), orthere must be justified reasons(giustificato motivo).

In the case of justified reasons(whether objective ones relating to theundertaking or subjective ones relatingto the employee), full notice and atermination payment must be given.

For there to be just cause, there mustbe grave misconduct, so that theemployment relationship is deemed tobe unable to continue, evenprovisionally. In this case, no notice needbe given, although the employee is stillentitled to the termination payment.

Disciplinary sanctions against anemployee are regulated by statute,collective agreements and disciplinarycodes laid down by the employer.Failure by the employer to post a copyof the disciplinary procedures in eachproduction unit renders the disciplinarysanction void. An employee maychallenge any disciplinary procedure byrequesting that an independentconciliation and arbitration boardinvestigate the matter. If disciplinaryprocedures are not complied with, theemployer’s failure to comply can bechallenged in Court.

Dismissal must be promptly notified tothe employee in writing. The notice muststate in detail the reasons for thedismissal (just cause or justified reason).Failure to observe these requirementsrenders the dismissal ineffective.

A termination payment is defined by lawas a deferred compensation which anemployee is entitled to receive upontermination of employment, whether inthe case of resignation or dismissal, andregardless of the reasons.

The amount of a termination payment iscalculated according to a complexformula, which approximately representsthe annual salary (including payments inkind) paid each year divided by 13.5.Employers set aside such terminationpayments annually as reserves in thebalance sheet throughout theemployment. The law provides thatemployees with at least eight years’service are entitled to ask the employerfor an advance payment equal to 70 percent of the accrued terminationpayment; requests must be satisfiedannually in respect of up to ten per centof the employees entitled to suchadvance payments or, in any case, inrespect of up to four per cent of thetotal number of employees.

An employee who has been dismissedwithout just cause or justified reasonscan make a complaint to the localTribunale. Reinstatement orders can bemade only in respect of undertakingswith more than 15 employees.An employee who obtains areinstatement order is in a strong position.The employer must pay full salary andbenefits until the order is complied with(minimum payment is equal to fivemonths’ salary). The employee candecide whether to accept an employer’soffer of reinstatement. As an alternativeto reinstatement, the employee may askfor a payment equal to 15 months’salary. Employees in undertakings withless than 15 employees are entitled to apayment which varies between two anda half and six months’ salary dependingupon seniority.

13.3 Special ProtectionCertain types of employees, such aspregnant women, employees who havea child up to one year of age oremployees on military service enjoysome indirect protection againstdismissal. In these cases, it is for theemployer to prove that there is justcause for dismissal which is not relatedto the person’s condition or status.Trade union members and employeerepresentatives benefit from morespecific protection in relation to theirduties.

13.4 Closures and Collective DismissalsThe law regulates collective dismissalsand provides that employers inundertakings with more than15 employees who intend to dismissmore than five employees (within aperiod of 120 days) for the purpose ofrestructuring operations, are required tocarry out a complex consultation andnegotiation procedure with trade unions,which may have a duration of 75 days.If this procedure is not complied with,the Courts can declare any subsequentdismissal void.

14. Data Protection14.1 Employment RecordsLegislative Decree No. 196/2003regulates the processing of personaldata, including the collection, storageand use of information regardingemployees (the “Consolidated Act”).


109

The Consolidated Act, consolidates pre-existing legislation rather thanintroducing major changes and it setsout very precise requirements to befollowed for the lawful processing ofpersonal data. Workers’ Bill of Rightsalso regulates the processing of data.

As a general rule, employers, as do allother data controllers, have to complywith the specific principles of theConsolidated Act when processingsensitive personal data, i.e. any datawhich identifies the employee’s religious,sexual, or political orientation, ormembership of or affiliation to any othergroup or union. An employee’s priorwritten consent and authorisation fromthe Italian data protection authority aregenerally necessary to process sensitivedata, subject to a limited number ofexceptions. The Italian data protectionauthority grants an authorisation toemployers to process sensitive data foremployment purposes annually. Thisauthorisation describes the permittedpurposes of the processing, the datasubjects covered, the processingarrangements, data categories and themethods for data maintenance,communication and dissemination.

An employee’s prior consent is requiredfor the processing of personal data.Such consent is valid only if freely given,documented in writing, and theemployee has been informed of thefollowing:

(i) the purposes and methods of theprocessing of the data beingrequested;

(ii) whether compliance with the requestfor the data is mandatory orvoluntary;

(iii) the consequences of a refusal orfailure to reply;

(iv) the categories of person to whomthe data may be communicated andthe geographic area within which thedata may be disseminated;

(v) the right to access his/her personaldata, and of the right to have his/herpersonal data updated, erased,blocked or rendered anonymous if it

is incorrect or has been obtainedunlawfully. For these purposes,personal data which is not necessaryfor the purposes for which it wascollected or processed is consideredunlawfully obtained and may not beretained;

(vi) who the person responsible for theprocessing will be.

As a general principle, consent is notrequired if the processing of personaldata meets at least one of a series ofjustifying conditions, specified in theConsolidated Act. Consent is notnecessary if (i) the processing isnecessary for compliance with a legalobligation; (ii) the processing isnecessary for the performance of acontract to which the data subject is aparty; (iii) the processing concerns datataken from public registers, lists,documents or records that are publiclyavailable; (iv) the processing concernsdata relating to economic activities thatare processed in compliance with thelegislation in force as applying tobusiness and industrial secrecy; (v) theprocessing is necessary to protect life orbodily integrity of a person; (vi) theprocessing is necessary for carrying outinvestigations or defend a legal claim;(viii) the processing is necessary for thepurposes of legitimate interests of eitherthe data controller or a third partyrecipient in the cases specified by theItalian data protection authority, incircumstances where those interests arenot overridden by the interests orfundamental rights and freedoms of thedata subjects; (ix) the processing iscarried out by no-profit associations;and (x) the processing is necessaryexclusively for scientific or statisticalpurposes. The condition relating to theperformance of a contract to which thedata subject is a party of relatively broadapplication. This condition may beapplicable in the context of anemployment relationship to the extentthat the processing of the employees’personal data is necessary for theemployer in order to perform itsobligations in the relationship.

Employers are prohibited frominvestigating and collecting dataregarding religious and political opinions,

including opinions relating to tradeunions. Any act or decision taken by anemployer on the basis of the politicalopinion, ethnic origin, language orgender of any employee may also bediscriminatory and therefore void, andthe presence of such data on apersonnel file could be used in court asevidence of discrimination.

As a general rule, the employer cannotcontrol, for instance, the contents of itsemployees’ e-mail, unless a series ofconditions are met. Any breach by theemployer of the relevant data protectionrules can lead to an administrative fineranging from c 3,000 to c 90,000. Inaddition, an additional administrativesanction in the form of the publication ofan injunctive order may also be applied.Finally, if the employer causes damageto his/her employees as a consequenceof the processing of their personal datait may be liable to pay civil damagespursuant to Article 2050 of the ItalianCivil Code. Criminal sanctions only applyif (i) personal data are unlawfullyprocessed with a view to making a profitor to causing harm to another; (ii) therelevant minimum security measuresrequired by the law are not adopted; or(iii) the provisions issued by the Italiandata protection authority are notcomplied with.

14.2 Employee Access to DataEmployees are entitled to obtain, uponsimple oral request, confirmation thatpersonal data about their job exists, evenif the data is not yet recorded, and to beclearly informed about the nature of thedata, the origin of their personal data,the aim and terms of the dataprocessing, the identity of the personresponsible for the data processing andthe people to whom the data can bedisclosed. The processing of employees’data by means of automated callingsystems, email, facsimile, MMS or SMSor other electronic communicationsmeans for advertising purposes is onlypermitted with the prior employeeconsent (on an “opt-in” basis). In anyevent, direct marketing must not disguisethe identity of the data controller andmust provide a means by which theemployee can exercise his or her right toobject without being penalised as aconsequence of doing so.



110


14.3 MonitoringThe Consolidated Act does not containspecific provisions governing themonitoring of employee communications,whether e-mail, Internet use, telephone,fax or voicemail, therefore this activitymust be considered subject to thegeneral principles and conditionsgoverning the processing of personaldata. The Consolidated Act does,however, prohibit any kind of remoteaudio-visual systems such as CCTV inthe work place aimed at monitoring theactivity of workers, unless therequirements of the Workers’ Bill ofRights are met. There is a risk thatmonitoring e-mails sent or stored byemployees, internet access or telephonecalls during working hours could beclassified as an indirect means ofremotely controlling employees’ workingactivities. An employer may set up audio-visual systems or similar systemsmonitoring the activities of employees, if:

(vii) they are necessary because ofspecific and defined organisationaland technical needs (e.g. in order toensure safety in the work place ordue to the particular businesscarried out by the employer); and

(viii)the works council has given its priorconsent. In the absence of a workscouncil or in the event that anagreement with the works councilcannot be reached, the employer isentitled to file a request with theLabour Office in order to obtain therelevant authorisation from theLabour Authority. In the absence ofsuch agreement or authorisation, theaudio visual system or similartechnical device should not be setup and the employees’ awareness ofthe introduction of remote controldevices into the workplace or theindividual employee’s acceptance isnot deemed valid consent for thispurpose.

14.4 Transmission of Data to Third PartyEmployers may transfer personal andsensitive data to third parties providedthat: (i) employees have been previouslyinformed of the entities to which theirdata may be transferred and haveconsented to the transfer; and (ii) thetransfer is for a legitimate purpose.

The Consolidated Act generally prohibitsthe transfer of personal data outside theEuropean Union if the laws of thedestination countries do not guarantee alevel of protection equal to theprotection offered by Italian andEuropean law. Non-EU transfers willnevertheless be permitted if theemployee consents to the transfer inwriting, or for example if the transfer isnecessary (i) to perform obligationsarising from a contract to which theemployee is a party, (ii) to gatherinformation at the employee’s requestprior to the conclusion of a contract, or(iii) for the conclusion or performance ofa contract in the interests of theemployee.


111

Latvia1. IntroductionThe basic legislative act that regulatesemployment relationships in Latvia is theLabour Law, Darba likums (LL), whichcame into force on 1 June 2002.It regulates the major aspects ofemployment ranging from jobadvertisements to claims againstunjustified dismissals. The LLestablishes a minimum bench mark foremployment rights and obligations,accordingly any provisions inemployment contracts, collectiveagreements, internal work regulationsetc which reduce these minimumemployment rights are void.


2.1 GeneralAny person, who performs work underan employment contract, is deemed tobe an employee (darbinieks), and theother party to an employment contractis always the employer (darba deve-js).The LL applies to the legal relationsbetween any employee and his or heremployer.

The law specifically provides that part-time employees and employees with afixed-term contract are entitled to thesame conditions as full-time andindefinite term employees. Moreover, thelaw provides that employment contractsmust generally be for an indefiniteduration, and only in certain specifiedcases is a fixed-term contract justified.

2.2 DirectorsUnder the provisions of the LL membersof the management boards (valdesloceklis) and supervisory boards(padomes loceklis) of companies can beemployed under contracts other thanemployment contracts. In such casesthe mandatory provisions of the LL donot apply, giving a company greaterflexibility. Employment contractsconcluded with a board member mustbe of a fixed duration.

3. Hiring3.1 RecruitmentThe State Employment Agency,Nodarbina-ti-bas Valsts ag‘entu-ra (SEA)

offers personnel services to employers,which can be useful, in particular forfinding lower level employees.Private recruitment agencies must havea licence from the SEA. Internet-basedplacement firms are becomingincreasingly popular among youngerpersons looking for work.

The LL regulates several other issues inrelation to the recruitment of employees,including the right of the employer torequest that a candidate undergo amedical prior to recruitment. There arealso restrictions on what may beincluded in a job advertisement and onthe type of question that may be askedduring a job interview, e.g. regarding acandidate’s marital status, pregnancy,religious beliefs, national or ethnic origin.

3.2 Work PermitsA non-EEA national will in most caseshave to obtain a work permit from theOffice of Citizenship and MigrationAffairs, Pilsoni-bas un migra-cijas lietupa-rvalde (OCMA). First, the employermust submit a “work summons” to theState Employment Agency, Nodarbina-t i-

bas valsts ag‘entu-ra (SEA) withsupplemental documents in relation tothe proposed employment, including thedraft employment contract. A “worksummons” can, however, only besubmitted to the SEA after the vacantjob has been registered at the SEA forat least one month and has remainedvacant. The resident employer in Latviawill, in addition, have to affirm an officialoffer at the OCMA which in practicemeans than an employer recruiting aforeign employee will have to have theoffer approved by the OCMA.

After the work summons is approved,the employee must submit it togetherwith other required documents to anembassy or other representative office ofLatvia abroad in order to obtain aresidence permit from the OCMA.

4. DiscriminationAll employees have a right to equalwork, just remuneration and just, safeand non-hazardous working conditions.Direct or indirect discrimination at anystage of employment (includingrecruitment) on the grounds of aperson’s race, colour, gender, age,

disability, religious, political or otherconviction, national or social origin,wealth or family status, sexualorientation is unlawful.

It is unlawful to discriminate against anemployee on the grounds of his/hermembership of an organisation for theprotection of employees’ social,economic and professional interests(mainly trade unions). In addition, it isunlawful to subject an employee todetrimental treatment because he or shehas exercised his employment rightslegitimately and in the event of a disputethe employer bears the burden ofproving that the detrimental treatmentdid not result from the employee’sexercise of his or her rights.

The LL also imposes a generalobligation on employers to takereasonably adequate measures in orderto adapt the working environment fordisabled persons, to facilitate theirrecruitment, promotion and training.


5.1 Freedom of ContractThe LL provides that those provisions ofemployment contracts, collectiveagreements, internal work regulationsand the employer’s instructions, whichfall below the mandatory minimum rightsand obligations stipulated by the LL, arevoid and are unenforceable against anemployee.

5.2 FormEmployment contracts have to beconcluded in writing in duplicate, onecopy must be given to the employee,and certain minimum informationrequired by the LL has to be set out inthe contract. If an employment contractis not set out in writing, an employeecan make a written assertion that it hasbeen concluded, using any means ofproof of the existence of employment. Inthe meantime, an oral employmentcontract has the same consequences asa written one if at least one party hasbegun to perform it.

Employment contracts have to beconcluded for an indefinite period oftime, subject to a number of limitedexceptions, such as seasonal work,

Employment and Benefits in the European UnionLatvia


112


providing cover for an employeetemporarily absent, incidental work notcharacteristic for the undertaking, etc.The maximum aggregate term for asingle fixed-term employment contractor consecutive fixed-term contractsbetween the same parties is three years.However, although a seasonal workcontract cannot exceed 10 months,an employment contract with anemployee who is providing cover for atemporarily absent employee canexceed three years. If, upon the expiryof the fixed term, neither party requeststhe termination of employment and itcontinues de facto, the employmentcontract is deemed to be for anindefinite term.

5.3 Trial PeriodsIt is common for employers to require atrial period and this must be expresslyagreed in the employment contract.The maximum probation term is threemonths, excluding temporary employeeincapacity and other justified absence.During this term either party may givethe other party three days’ prior noticeof termination, without having to statethe reason for termination. If anemployee considers that he or she hasbeen dismissed during a probationaryperiod in breach of the principle of equaltreatment, that employee may bring aclaim before the court within one monthof receiving the termination notice.


An employee has a statutory obligationnot to disclose information that isregarded to be the employer’scommercial secret, and to take care sothat commercial secrets do not becomedirectly or indirectly available to a thirdparty. The employer must thereforeindicate to the employee whichinformation qualifies as a commercialsecret. The Commercial Law(Komerclikums) sets out additionalconditions, which must be fulfilled beforean employer can classify information as acommercial secret, e.g. the informationmust not be generally available to thirdparties, and the employer must havetaken reasonable measures for thepreservation of the confidentiality of theinformation. It is advisable for employersto prescribe in detail in the employment

contract the categories of informationregarded as commercial secrets, and tospecify that the confidentiality clause willcontinue to apply following thetermination of employment.

During the employment relationship theemployer may restrict the employee’sright to take up work with otheremployers (by-work), insofar as therestriction is justified to protect legitimateinterests of the employer, in particular ifthe by-work may adversely affect theemployee’s performance of his/herobligations.

The employee and the employer mayalso conclude post-terminationrestrictive covenants in relation to theemployee’s professional activity.The maximum term of a non-competeprovision is two years, and an adequatemonthly compensation is paid to theemployee for the duration of therestriction.

5.5 Intellectual PropertyGenerally, if an employee creates workthat is the subject of copyright, theeconomic rights to the work can betransferred to the employer, if theemployment contract or otheragreement so provides. In relation tosoftware created under the employer’sinstructions, the law presumes that alleconomic rights belong to the employer,unless the contract provides otherwise.An employer is entitled to an employee’sinvention, if it is produced whileperforming work under an theemployment contract that involvesinventive activity, or as a result ofcarrying out duties at the employer’srequest that involve research,construction, or specific projects, etc.However, in practice it is advisable thatthe rights and obligations of theemployer and the employee are definedin greater detail in the employmentcontract or collective agreement.

6. Pay and Benefits6.1 Basic PayThe statutory minimum wage at presentequals LVL 120 (approx. c171) permonth or LVL 0,713 (approx. c1) perhour (this is slightly higher for somecategories of employee, whose weeklyworking time is 35 hours instead of 40).

The employer is obliged to ensure equalpay for equal work, or, work ofequivalent value to employees withoutdiscrimination. If the amount ofremuneration that an employee receivesis contrary to the principle of equaltreatment, the employee may within acertain term bring a claim before thecourt for adequate remuneration.

Subject to the minimum wage, there areno other statutory conditions regulatingthe amount of remuneration, andemployment contracts do not generallyprovide for a regular increase of salary.

6.2 Private PensionsPension funds have now existed inLatvia for more than seven years.Closed pension funds are thoseestablished by employers, and onlyemployers may be shareholders ofclosed funds; these funds are only opento the employees of the founders andshareholders of the respective fund.Open pension funds are, by contrast,those whose founders and shareholdersare banks with a license to acceptdeposits from natural persons in Latviaor Latvian-registered life assurancecompanies. The latter are graduallybecoming popular, especially withyounger generation employees.Participation is purely voluntary, and canoccur either via individual or collectiveparticipation. In the latter case, anemployer must conclude a collectiveparticipation agreement. There are strictlegal requirements as to the content ofparticipation agreements for theprotection of the interests of theparticipants.

6.3 Incentive SchemesThere is no statutory obligation tointroduce such schemes, although theyare becoming more common in contractswith senior management of companies;these can include annual bonuses andshare options in the company.

6.4 Fringe BenefitsIt is increasingly common for employersin both the public and private sector toprocure medical insurance for their staff.Other common fringe benefits includereimbursement of mobile phoneexpenses and the provision of companycars for senior employees.


113

6.5 DeductionsAn employer is obliged to withhold theemployee’s obligatory social insurancepayments and income tax before payingthe salary to the employee. Additionaldeductions from the employee’s netsalary deriving from the employer’sclaims (e.g. for damage to or loss of theemployer’s property) against theemployee can be made within the limitsprescribed by the law (generally up to20 per cent). If the deductions areintended to cover damages caused bythe employee to the employer, theemployee’s written consent must first beobtained.

7. Social Security7.1 CoverageThe State social security system coversstate pensions (old age, disability,survivor’s pension), allowances andbenefits (maternity, paternity, sickness,unemployment, temporary disability,death grant, child care, child adoption,family benefit, etc). Since the reform ofthe State pension scheme, a part of thesocial insurance payments for youngergeneration employees (below the age of30 on 1 July 2001) are included in thefunded pension scheme, which isexecuted by the Exchequer or licensedinvestment management companies.Older employees can join the fundedpension scheme voluntarily.

7.2 ContributionsThe total amount of contribution equals33.09 per cent of the taxable base(broadly speaking, all income gained inemployment), and the employer coversa 24.09 per cent share of it, whereas theemployee pays a nine per cent share.The minimum taxable base for socialinsurance contributions is LVL 1800(approx. c2571) per year, whereas themaximum base is LVL 23,800 (approx.c 34,000) per year.

8. Hours of WorkThe LL includes detailed regulations onworking and rest time and sets the normalworking time at 40 hours per week andeight hours per day. A normal five dayworking week can be changed to six daysof work every week, if necessitated by thenature of the work, and employees’representatives have been consulted.Overtime is allowed only if the employer

and the employee have agreed in writing,and may not exceed 144 hours in fourmonths. Aggregated work can beprovided, if normal working time isimpossible to maintain, and may notexceed 56 hours per week and 160 hoursin four weeks. Shift work can beintroduced if it is necessary to ensurecontinuous work at an undertaking.

The LL sets the normal daily rest time ata minimum of 12 hours, and theminimum weekly rest amounts to aperiod of 42 hours without interruption,except in the event of aggregated work.Sunday is a general holiday, howeverworking is permitted on that day ifcontinuous work must be ensured and adifferent rest day is granted.

9. Holidays and Time Off9.1 HolidaysThere are 14 statutory holidays in Latvia(some of them on Sundays, e.g. EasterSunday). Employees are entitled to aminimum of four weeks of annual paidleave. It is allocated on a pro rata basisdepending on the time the employeehas spent working, and can be claimedafter the employee has worked at leastsix months for the employer.Annual paid leave may, in exceptionalcircumstances, be postponed to thefollowing year, but may not becompensated by money, except ontermination of employment.

9.2 Family LeavePregnancy leave and birth leave arecalculated together and amount to112 days, which are granted as a singleleave period. In some cases additionalpregnancy leave will be granted. Payduring this leave is provided by the Statesocial security system. It is 100 per centof the average monthly salary calculatedaccording to a set formula. Paidpaternity leave and leave for one of theadoptive parents of a child of no morethan three years of age is ten days.Any employee has the right to paid childcare leave of up to one and a half yearsof age, in relation to the birth oradoption, of a child. Childcare leave ispaid from the Social Security System.Upon returning from any of theseperiods of leave, the employee is entitledto return to the same position, or, if thatis not possible, to a similar or equivalent

position with equally beneficialconditions of employment.

9.3 IllnessIf an employee is temporarilyincapacitated due to illness and obtainsa physician’s note (darba nespe-jas lapa)certifying that he or she is unable towork, the employer will have to pay anillness allowance to the employee(75 per cent of the averageremuneration for the second and thirdday of illness, and 80 per cent startingfrom the fourth day) up to the fourteenthday of illness. From the 15th day ofillness, the allowance is paid by theState Social Insurance Agency(Valsts socia-la-s apdros̆ina-s̆anas ag‘entu-ra)from the social insurance budget.

9.4 Other time offRegular study leave can be prescribed inthe employment contract or collectiveagreements, however an employee canclaim 20 business days of paid leave peryear in order to sit state exams or towrite a diploma thesis at the end of hisstudies.

10. Health and Safety10.1 AccidentsThe Labour Safety Law (Darba aizsardzi-

bas likums) sets out an employer’sgeneral obligations in this area e.g. anobligation to assess labour safety riskfactors in the undertaking, mandatoryhealth inspections for certain categoriesof employees, etc. In addition, numerousGovernmental regulations set outdetailed labour safety requirements forparticular kinds of work. Compliancewith all these requirements is supervisedby the State Labour Inspection (Valstsdarba inspekcija). There is no particularobligation for an employer to providehealth insurance for employees, sincesocial assistance in the event of anaccident at work is provided under thecompulsory social security (socialinsurance) system.

10.2 Health and Safety ConsultationAn employer is required to consultemployees or labour safetyrepresentatives (shop stewards), whichshould be elected by employees if theundertaking or unit thereof has five ormore employees. In addition, theemployer must appoint one or several



114


labour safety experts in the undertakingdepending on the number of employees.

11. Industrial Relations11.1 Trade UnionsThe right to unite in trade unions is afundamental right of employees,protected under the Constitution(Satversme). The role of trade unionschanged fundamentally after thereestablishment of independence fromthe Soviet Union, where trade unionmembership had been high and unionswere used to help in the achievement ofthe political goals of the communistregime. Union membership has generallybeen constant over the last five years, atslightly below 20 per cent of the nationalworkforce. Unions are usually related toa particular sector of the industry, andmost of them are united under onefederation (Latvijas Bri-vo arodbiedri-busavieni-ba).

Trade unions are one form ofemployees’ representatives, thereforethey have the basic rights attached torepresentation, including access to theundertaking and the right to holdmeetings there. Trade unions have apriority right to conclude collectiveagreements and their consent must beobtained in some cases before amember can be dismissed.

11.2 Collective AgreementsCollective agreements (darba kopli-gums)must be in writing and are usuallyconcluded at the undertaking level,i.e. between a particular employer anda trade union; general agreements atindustry level (g‘enera-lvienos̆ana-s) areless common. Trade unions have priorityover authorised employees’representatives (elected individuals fromamongst the employees) in concluding acollective agreement. A collectiveagreement will cover all the employeesin an undertaking unless the collectiveagreement itself provides otherwise, andwill be enforceable.

The LL establishes a basic procedure forthe conclusion of a collectiveagreement, and the employer (orassociation of employers) cannot refuseto negotiate. A collective agreementmust be for a particular assignment orfor a fixed term. However, after the term

has expired, the provisions of thecollective agreement remain applicableuntil the conclusion of a new one.

11.3 Trade DisputesStrikes are permitted in the case ofcollective disputes of interests, althoughthe preliminary procedure for theresolution of such disputes, establishedby the Labour Dispute Law (Darba stri-dulikums) has to be observed.The decision to strike must be takenby a trade union at a general meetingattended by more than 50 per cent ofthe members (or their representatives).The decision to strike must be taken byemployees at a general meetingattended by at least 50 per cent of theemployees of the undertaking. A strikemust be notified to the employer at leastseven days in advance. Employeestaking part in the strike may not bedismissed, and are entitled to return totheir previous position afterwards.

The right to strike is restricted in anumber of cases, including theprohibition to strike in support of politicaldemands, or during the term of aconcluded collective agreement with theaim of amending it. Solidarity strikes areuncommon and are only permitted inconnection with the failure to concludeor observe a general agreement(on tariffs or social/labour guarantees atindustry level). Employers are entitledto lock-outs in the event of a strike,although the number of employeessubject to a lock-out may not exceedthe number of employees on strike.


Employers are obligated to provideinformation to employees’representatives and to consult thembefore taking decisions, which can affectthe interests of the employees.Consulting is defined as a dialogue andexchange of opinions with a view toachieving a consensus. Employees’representatives are entitled to requireinformation on the social and economicstatus of the undertaking, andinformation necessary for the conclusionof a collective agreement.

Employees’ representatives are entitledto be consulted prior to decisions being

taken in relation to the following issues:determination of work norms, internalwork regulations, the establishment of asix-day working week, shift work,aggregated work, breaks and vacationschedule. There are also more detailedconsultation obligations in relation tocollective redundancies and transfers ofundertakings.

The European Works Councils’ Directivehas been transposed into national law.


12.1 GeneralThe Acquired Rights Directive has beenimplemented in Latvia. The transfer ofan undertaking or an independent partof it, as well as mergers and acquisitionsof companies, are subject to theregulation in the LL relating to thetransfer of an undertaking. In general,the obligations arising from theemployment relationships existing at thetime of the transfer, will pass from thetransferor employer to the transfereeemployer; this also includes anycollective agreement in force at the timeof the transfer, the provisions of whichcannot be amended to the detriment ofthe employees for a one year periodfollowing the transfer. An exception tothis rule is the transfer of an undertakingwithin the context of bankruptcyproceedings. The transfer itself is not avalid reason for termination, it ishowever possible to terminate forgeneral reasons e.g. dismissals justifiedby the implementation of economic,organisational, technological measures,or, measures of a similar nature in theundertaking.


The transferor and transferee mustinform the representatives of theiremployees or if such representatives arenot elected - the employees about:(i) the date or proposed date of thetransfer; (ii) the reasons for the transfer;(iii) the legal, social and economicimplications of the transfer ofemployees; and (iv) any measures oractivities envisaged in relation to theemployees.


115

The transferor must provide thisinformation to his employees not laterthan one month before the transfer.The transferee must provide thisinformation to the employees not laterthan one month before the transfer startsdirectly affecting the working conditionsand employment terms of his employees.

Where the transferor or transferee hasplanned to take certain organisational,technological or social measures inrelation to his employees in connectionwith the envisaged transfer, it is underan obligation to start consultations withthe representatives of the employees notlater than three weeks before thetransfer with an aim of reaching anagreement on such measures and theirimplementation. The obligation to startconsultation, however, does not createany obligation on the employer toactually reach agreement.

There are no thresholds in terms ofnumber of employees triggering theinformation obligation. The obligation ofinformation and consultation must beperformed before the transfer. Inprinciple the documentation giving effectto the transaction (e.g. sale andpurchase agreement) underlying thetransfer can be signed before theinformation and consultation takesplace, provided the transfer takes placeafter the information and consultation isperformed in time as described above.

The LL does not prescribe any timeframe as to the length of the informationand consultation process.The information process in practiceshould not be a time consuming processas it merely involves the provision ofinformation. The consultation might takemore time. However, given the fact thatthe consultation does not create anyobligation on the employer with regardto the outcome of the consultation, theemployer may be in a position to controlthe time frame of the consultationprocess.

12.3 Notification of AuthoritiesThere is no obligation to supplyinformation or consult with state orregulatory bodies in relation to thetransfer of an undertaking.

12.4 LiabilitiesFailure to comply with information andconsultation obligations in relation to thetransfer of undertakings may give rise toan administrative fine up to c700.The fine would be imposed on themanagement of the transferor ortransferee, if they were legal entities.In addition, the employee(s) adverselyaffected by the transfer could claimappropriate compensation. For example,if an employee is unjustifiably dismissedas a result of the transfer of undertaking,the employee could claim the annulmentof the dismissal and payment of averageearnings for the whole duration of thedismissal. The possibility that a violationof the procedural requirementsassociated with the transfer of anundertaking could lead to the annulmentof the actual transfer cannot be ruledout.

13. Termination13.1 Individual TerminationAn employer wishing to bring anemployment contract to an end must becareful to ensure that the provisions ofthe LL in relation to the reasons for andprocedure leading to dismissal aresatisfied.

Exceptionally, the employer may apply tothe court for permission to dismiss anemployee when he has a relevantreason, but none of the explicit clausesof the LL are applicable to the particularcircumstances.

13.2 NoticeDismissal during a probationary periodrequires a three day notice period.In other cases, the minimum noticeperiod, established by the LL, is eithernone, 10 days or one month, dependingon the particular clause of the LL,which is used as grounds for thedismissal. The employment contract orcollective agreement may provide forlonger periods of notice.

The employer must give the dismissalnotice in writing. In the event ofdismissal due to the employee’sbehaviour, he must first require theemployee’s written explanation, andwhen deciding whether to dismiss, ornot, the gravity of the breach, theemployee’s previous work, etc. must be

considered. The dismissal may only takeplace within one month of the discoveryof the violation, and in any event no laterthan six months after the violation wascommitted.

13.3 Reasons for DismissalDuring the probationary period, anemployee may be dismissed without theneed to give reasons. Aside from that,the LL sets out an exhaustive list ofgrounds on which an employee may bedismissed. These must be related eitherto the employee’s behaviour (e.g.appearing intoxicated at work, graveviolation of the employment contract,breach of work safety rules leading toendangerment of the safety and healthof other persons), his capabilities (theemployee lacks professional skills forperforming the work or is medicallycertified as incapable of performing thework due to his health status), oreconomic, organisational, technologicalmeasures, or, measures of a similarnature in the undertaking (liquidation ofthe employer, reinstatement of theprevious employee to the same work, orreduction in the number of employees).In any event, the employer must notifythe employee in writing of the reasonsunderlying the dismissal (this can beincluded in the dismissal notice). Theemployee is entitled to full pay duringthe notice period.

A dismissal on grounds related to theemployee’s capabilities or economic,organisational, technological measures,or, measures of a similar nature in theundertaking (except the liquidation of theemployer) can only be implemented if itis impossible to transfer the employee toanother position in the undertaking,where the employee can work, with theemployee’s consent.

The employer and the employees’representatives can agree on theestablishment of a labour disputecommission (darba stri-du komisija) in theundertaking. However, these institutionsare not common in private sectorundertakings.

Once the employer gives notice to theemployee, the latter can challenge it byfiling a claim in court within one month(unless a labour dispute commission



116


procedure is applicable). Generally, if thecourt finds the dismissal unjustified, theemployee will be reinstated (unless he orshe requests otherwise) and his averageremuneration for the period of forcedabsence from work (i.e. period ofunjustified dismissal) will have to bepaid.

It is the employer’s obligation to provethat the dismissal occurred inaccordance with the law, and wasjustified.

13.4 Special ProtectionAn employee may not give notice ofdismissal to an employee duringabsence due to sickness or otherjustified reasons. In addition, the lawrestricts the right to dismiss a pregnantemployee or for one year followingchildbirth (or through-out thebreastfeeding period) or a disabledemployee (although dismissal on thebasis of the employee’s behaviour is stillallowed).

A member of a trade union can in mostcases only be dismissed with theconsent of the trade union, therefore,before giving notice of dismissal, theemployer must find out whether theemployee belongs to a union. A worksafety shop steward (elected by theemployees) can only be dismissed withthe permission of the State LabourInspection.

13.5 Closures and Collective DismissalsIf the number of employees, dismissedfrom an undertaking due to a “reductionin the number of employees” (darbiniekuskaita samazina-s̆ana) within 30 daysexceeds a certain threshold (from five to30 employees, depending on the totalnumber of employees in theundertaking) the dismissals are classifiedas a collective dismissal. This imposesan obligation on the employer to carryout a collective dismissal, to provideemployees’ representatives with detailedinformation on the dismissal andcommence consultations with them ingood time, in order to agree on thenumber of employees subject todismissal and their social guarantees(i.e. dismissal benefits, pensionsschemes in addition to the State Socialinsurance schemes and other issues

arising from the Collective agreement oremployment contract), as well as thedismissal procedure itself. In addition,the employer must notify theEmployment State Agency (Nodarbina-ti-

bas valsts ag‘entu-ra) and the localmunicipality of the undertaking at least60 days in advance.

It should be emphasised that acollective dismissal includes only thoseemployees, who are subject to dismissaldue to a “reduction in the number ofemployees”. This is defined by the lawas a dismissal for reasons, which are notrelated to the employee’s behaviour orcapabilities, but is sufficiently justified bythe implementation of urgent economic,organisational, technological measures,or, measures of a similar nature in theundertaking.

14. Data Protection14.1 Employment RecordsUnder the LL an employer may transferthe information acquired from, and, thedocuments submitted by a job applicantin applying for work only to the personswho take the decision about therecruitment of that applicant. Theinformation and documents may bedisclosed to third parties only with theconsent of the job applicant. Moreover,information about the employee’s healthstatus and professional qualifications,which the employer has obtained uponthe employee’s application for work,may be used by the employer only inorder to carry out organisational,technical or social measures in theundertaking, and the employer is liableto ensure that such information is onlyavailable to persons who use them forcarrying out the respective measures.

The Natural Persons Data ProtectionLaw (Fizisko personu datu aizsardzi-baslikums; hereinafter - NPDPL), whichimplements the EU Data ProtectionDirective, is applicable to employers assystem controllers. Therefore, a localemployee will normally have to registerits employment records filing systemwith the Data State Inspection (Datuvalsts inspekcija).

14.2 Employee Access to DataUnder the NPDPL an employee has therights of any personal data subject,

namely, to obtain all information abouthim or herself, which is held in apersonal data filing system.

14.3 MonitoringAlthough the fundamental right toprivacy is constitutionally recognised,most of the legislation in force deals withthe rights and obligations of the State inthis context (e.g. the right ofinvestigation authorities to monitortelephone communication), and atpresent there is little regulation thatapplies to other private individuals.Therefore, it is recommended that, atthe very least, the employer shouldinform the employees about any form orsurveillance or monitoring that theemployer carries out, and include areference to that in the employmentcontracts and internal work regulations.


As indicated earlier, the employer mayonly transfer information acquired fromand the documents submitted by a jobapplicant in applying for work to thepersons who prepare the decision aboutthe hiring of that applicant, and thatinformation may not be disclosed tothird parties without the consent of thejob applicant.


117

Lithuania1. IntroductionEmployment relations in Lithuania arebasically regulated by the Labour Code(2002). This regulates the formation,amendments to and termination ofemployment contracts, salaries,vacation, liability, dispute settlement,etc., and in practice is applied to almostall employment relations.

Employment relations with civil servants,persons working in certain services,such as the police, the prosecutor’soffice and certain other employees, areregulated by the Law on Public Serviceas well as specific legislation andgovernment resolutions. Relations withtrade unions are regulated by the Lawon Trade Unions and the Labour Code.

Employment contracts must be drawnup in accordance with legislativerequirements and it is unlawful to seekto contract out of the minimumemployment rights established bylegislation. In certain cases, however,collective agreements may establishconditions deviating from the legislativeprovisions provided it is expresslysanctioned by the relevant legislation.

Trade unions and work councils can beestablished in enterprises, however,collective representation of employees isnot very well developed. Therefore, ingeneral, the influence of collectiveagreements on employment relations isnot significant. Labour disputes areusually handled by the courts.


2.1 GeneralLithuanian legislation does notdistinguish between blue collar andwhite collar employees. There are nospecific regulations in relation to theemployment of directors, other than inrelation to working time and termination.

2.2 DirectorsThe Labour Code provides that the workof administrative (management) officialsof a company which exceeds thecontractual working time is not deemedovertime work. In addition general

managers and members of theManagement Board of companies arenot as a matter of law entitled totermination notice and severance pay,unless such guarantees are establishedin the employment contract.

2.3 OtherPart-time work is permissible by mutualagreement. The part-time contract mustarise at the request of the employee dueto his/her medically certified state ofhealth, at the request of a pregnantwoman, a woman who has recentlygiven birth, or who is breast-feeding, anemployee raising a child under threeyears of age, an employee who is asingle parent of a child under fourteen ora disabled child under eighteen years ofage, an employee under 18 years of age,an employee medically certified asdisabled, employees nursing a sick familymember. The employment contract mustexpressly address the part-time workingconditions and if a full-time contract isvaried it must be amended to reflect thenew part-time arrangements.

The salary for the part-time employeesmust be proportionally equivalent to thesalary paid to equivalent full-timeemployees. The number of part-timeemployees is subject to limitations andin certain cases it has to be reported tothe State Labour Inspectorate.

Fixed-term employment contracts maynot exceed five years. Under theprovisions of the Labour Code,employment contracts are normally ofan indefinite duration; fixed-termemployment contracts are accordinglyunlawful if the employment is of apermanent nature, unless there is anapplicable exception as a matter of lawor collective bargaining agreement.

If another fixed term employmentcontract for the same role is concludedwith the same employee within onemonth of the expiry of a previous fixedterm contract, such a contract can beclassified as a contract of indefiniteduration, at the request of the employee.

Employees working under a fixed-termcontract are subject to the same socialguarantees as employees working underan employment contract of an indefiniteduration.

Temporary employment contracts areconcluded where necessary for urgentor short-term work, or to provide coverfor employees temporarily absent (dueto illness, vacation etc.). Fixed termcontracts of up to two months may alsobe concluded with students, during theirvacations.

Employees working under temporaryemployment contracts are subject to thesame rules in relation to working time,they are not subject to a trial period, orgranted vacations. They do receiveseverance pay if the temporary contractis terminated. If the fixed term of atemporary employment contract hasexpired but the employment relationshipactually continues and neither party hasserved notice of termination prior to theexpiration of the term, the contract willbe deemed extended for an indefiniteterm.

In certain circumstances, an employeehas the option of agreeing to performadditional work (not specified in thecontract) at the same workplace, or toundertake secondary duties. Anemployee wishing to undertakesecondary duties must, prior to theconclusion of an employment contract,provide the employer proposing to hirehim for the performance of thesecondary duties with a certificate fromthe principal employer specifying thetime when the daily work starts andends in the principal working place.

Home workers perform their work athome by agreement with the employer.The working time of a home worker maynot exceed 40 hours a week. A homeworker is not subject to the internal rulesof the employer.

3. Hiring3.1 RecruitmentEmployers are free to select personnelas they wish subject to compliance withthe rules that outlaw discrimination.

3.2 Work PermitsThe Law on Legal Status of Foreigners,provides that a foreigner must obtain atemporary residence permit if he or sheplans to stay in Lithuania for more thanthree months per six month period or ifhe or she plans to work or to be

Employment and Benefits in the European UnionLithuania


118


engaged into any other legal activities inLithuania.

Work permits are required for theemployment of foreigners in Lithuania(there are certain exemptions, e.g.government workers, diplomats, etc).The work permit is issued by the LabourExchange under the Ministry of SocialSecurity and Labour, which, by doingso, takes into consideration internallabour market demand and applies anannual quota for the employment offoreigners as approved by theGovernment.

It should be noted that generalmanagers of enterprises are not requiredto obtain a work permit.

The Law on Legal Status of Foreignersstipulates that nationals of EuropeanUnion member states, who areemployed or self-employed in Lithuaniaand who intend to stay in Lithuania formore than three months in any sixmonth period, have to declare theirplace of residence according to theprocedures established by the Law onDeclaration of Place of Residence. Theydo not need to obtain any residence orwork permits.

4. DiscriminationDiscrimination on the grounds of race,colour, national or social origins,personal status, age, disability, privatelife, religious activities and unionactivities is prohibited by the Law onEqual Opportunities (2003). The scopeof the law is broad and it is applied to allaspects of the employment relationship,including recruitment, remuneration,promotion and dismissal. The equalopportunities controller, investigatescomplaints of discrimination and canadopt a binding decision (e.g. transferthe investigation to the prosecutor, in theevent a crime may have beencommitted; warn the employer, etc). Avictim of discrimination has a right toclaim damages under the rules of civilliability. There are no limits on the level ofdamages that can be awarded.


5.1 Freedom of ContractAlthough, an employer and an employee

are, in principle, free to settle the termsof their relationship, this freedom is, inpractice, limited. The contractual termsof the employment agreement may notbe less favourable than mandatoryprovisions of laws. In certain cases,conditions that are more beneficial forthe employer may be established by thecollective agreements, provided it isexpressly permitted as a matter of law.

5.2 FormAny employment contract must beconcluded in writing and in accordancewith the sample form approved by theGovernment. The employment contracthas to be concluded in at least twooriginals – one for the employee, theother for the employer. On the day ofconclusion of an employment contract itshould be registered with theRegistration Journal of EmploymentContract (.e. the formal registermaintained by the employer). Suchregistration is not mandatory where anemployer is a natural person employingthree or less employees. An employeemay commence his/her work only afterhaving received from the employer anidentification card, one original of theemployment contract, and after beingfamiliarised with the working conditions,collective agreement, if any, internalwork regulations and other regulationsapplicable to the work place.

The following terms must be specified inthe employment contract:

■ The place of work;

■ The employee’s duties;

■ The terms applicable toremuneration.

The parties may also agree other termsand conditions of employment, such asa probation period, unlimited liability ofthe employee to the employer fordamage caused to the employer, workregime, fringe benefits, etc.

5.3 Trial PeriodsAn employment contract may include atrial period. As a general rule the trialperiod may not exceed three months.A trial period may be established toassess whether:

■ The employee is suitable for thework he/she is employed; or

■ The work is suitable for theemployee.

If an employment contract incorporatesa trial period for the purpose of testingwhether the employee is suitable for thework, the employer may terminate theemployment contract by the end of thetrial period on three days’ written noticewithout paying the employee anyseverance payment. If the trial period isestablished for the purpose of assessingwhether the work is suitable for theemployee, the employee may terminatethe contract during the trial period onthree days’ written notice. If anemployee continues working after theexpiry of the trial period, theemployment contract may only beterminated in accordance with thegeneral rules on termination (see section13 below).

5.4 Confidentiality andNon-Competition

The parties to an employment contractcan agree terms and conditions, whichare not directly prohibited by relevantlegislation, however, the employmentcontract must comply with the generalprinciples of justice, reasonableness andfairness.

When recruiting an employee, acompany may include non-competeprovisions in the employment contractor conclude a separate non-competeagreement prohibiting the employeefrom competing with the formeremployer after termination ofemployment. The non-competeprohibition must be reasonable andremunerative. However, in practiceenforcement of such non-competeclauses may be complicated.

Employees must keep the businesssecrets of the employer. If an employeeviolates this obligation, the employer isentitled to compensation for any lossincurred. The Competition Law providesthat an individual may reveal commercialsecrets learned as a result ofemployment or other contractualrelations with an enterprise no earlierthan one year after the date of the


119

termination of the employment or othercontractual relations, subject to anyprovisions to the contrary in the relevantcontract. In practice it is recommendedthat employers incorporate this statutoryprovision into the employment contractand the internal rules of the company.In addition it is advisable to requireemployees to sign a document settingout the categories of informationclassified as commercial secrets by themanagement body of the employer andgive a written undertaking not todisclose such information, failing whichthe employee will be liable in damages.

5.5 Intellectual PropertyEmployee inventions are defined andregulated by the Law on Patents. Ifsomething is deemed to be an invention,the employee is obliged to promptlyinform his employer in writing to thateffect. Until a patent application isprepared, both the employer and theemployee must keep the details of theinvention secret. An employee will notbe entitled to royalties for his inventionsif his contract of employment explicitlyspecifies that his duties involve creatinginventions and the level of remunerationtakes this into account.

Similar to those of patent invention arethe rights to design which can also beregistered in order to entitle the designerto royalties. The design rights of designscreated by an employee during hisemployment and in accordance with hisemployment contract will be owned bythe employer, unless the employmentcontract specifies otherwise.

The Law on Copyright and RelatedRights provides that the property rightsto copyrighted material created by anemployee during his employment and inaccordance with his employmentcontract will be owned by the employerfor a period of five years, unless theemployment contract specifiesotherwise. One exception exists inrelation to the title to software, which willbe owned by the employer indefinitely,unless the contract stipulates otherwise.

6. Pay and Benefits6.1 Basic PayThe minimum pay tariffs (hourly andmonthly) to be paid to each employee

are established by the Government.The hourly minimum pay is currentlyLTL 3.65 (c1.06). The monthly minimumpay is currently LTL 600 (c173.77).Minimum pay rates are revised from timeto time, however, there are no fixeddates for the minimum pay rates to beincreased. Employees must be paid atleast twice per month. At the writtenrequest of the employee, pay may bepaid monthly only. Parties have to agreeon the dates when the salary is paid.The Labour Code obliges the employerto present each employee with payrolldetails setting out the net and grosssalary and details of deductions made.

Indexation is left to be negotiated by thecontracting parties or by the relevantcollective agreement.

If an employee’s salary equals theminimum monthly salary, it has to beincreased in line with any increase to theminimum monthly salary. In addition ifthe salary of an employee is tied to theminimum monthly salary (e.g. theemployment contract stipulates that thesalary payable amounts to three timesthe minimum monthly salary) then suchsalary must also increase in line with anychanges to the minimum monthly salary.

6.2 Private PensionsSocial guarantees are ensured by thestate social security system. There is noobligation on employers generally toprovide private pension arrangements.Private schemes are either insured withpension insurers or through a pensionfund enterprise.

6.3 Incentive SchemesProfit-related pay may be paid to somemanagerial staff. There are no legal orfiscal measures encouraging employeeshare participation.

6.4 Fringe BenefitsFringe benefits vary according to theinternal policy rules and may includebonuses, company cars (for more senioror frequently travelling employees),mobile phone, etc. If the fringe benefitsare provided for personal use as well,they may be subject to taxation.

6.5 DeductionsEmployee’s income tax is deducted bythe employer at source and thenaccounted for to the tax authorities.The income tax rate is 27 per cent.

The basic tax deduction (tax exemptminimum) is LTL 290 per month (c84).Certain groups of persons, such asdisabled, persons having three or morechildren, are granted a larger tax freeband.

7. Social Security7.1 CoverageThe State social security systemprovides benefits in the case of old age,disability, death, sickness, maternity andindustrial injury.

7.2 ContributionsThe social security system is financed byemployee and employer contributionswhich are based on the employee’ssalary. A three per cent social insurancepayment is withheld from the income ofthe employee and is deducted from thegross salary of the employee; a 31 percent social insurance payment is paid bythe employer on top of the gross pay tothe employee.

Currently, there are no upper limits fortaxation or social insurance paymentsand the fixed tax rate is applied.

8. Hours of WorkOrdinary weekly working time may notexceed 40 hours per week and eighthours per day. Exceptions may beestablished by legislation, governmentalresolutions and collective agreements.The maximum length of a workday orshift, including overtime, as well as thework under two or more employmentcontracts may not exceed twelve hoursper day.

The working hours of the employees ofcertain categories prescribed byGovernment, such as medicalpersonnel, child carers, childrens’education institutions, energy sector,special communication agencies, etc, aswell as security services watchmen maynot exceed twenty-four hours per shift.However, the average weekly workingtime (in any seven day period) of suchemployees may not exceed forty-eight



120


hours, and the rest time in between theworking days must not be less thantwenty-four hours.

9. Holidays and Time Off9.1 HolidaysThere are 12 public holidays per year.Where a day off coincides with a publicholiday, the day off is taken on thefollowing working day. The basic right isto four weeks (28 calendar days) paidannual leave each year after six monthscontinuous employment. This isincreased to five weeks (35 calendardays) for minors under 18, disabledemployees, single parents who areraising a child under 14 years ordisabled child under 18 years and otheremployees specified by law. Specificgroups of employees (e.g. employees ofthe teaching, medical, aviation, ormaritime professions or those working inhazardous conditions) have an extendedannual leave entitlement. The totalannual leave entitlement conferred bylaw may never exceed 58 calendardays. Public holidays falling within aperiod of leave do not count as part ofthe leave, nor does a period of sickness.

9.2 Family LeaveWomen are granted pregnancy andchildbirth leave for the period of70 calendar days before childbirth and56 calendar days after it (in the event ofa complicated childbirth or the birth oftwo or more children - 70 calendar daysmaternity leave is granted after thebirth), provided she was covered bysocial sickness and maternity insurancefor at least three months during the12 months preceding the pregnancyand childbirth leave, or, covered for sixmonths during the preceding24 months. Pregnancy and childbirthleave is granted to the woman as asingle period (126 days in total),regardless of the number of the daysactually used before childbirth.

A man is granted one month’s paidpaternity leave from the child’s birth untilthe child is one month old, provided hewas covered by the social sickness andmaternity insurance for at least sevenmonths during the preceding 24 months,and is married to the mother of thechild. A man who is married to a womanwho has given birth is considered to be

a father to that child pursuant toLithuanian law. Paternity leave is paid bythe social insurance authority andpaternity pay is equal to the averagesalary of the employee. On request, amother (adoptive mother) or a father(adoptive father) or a grandmother or agrandfather or other relatives who arebringing up the child may be grantedchild care leave until the child reachesthree years of age. Alternatively, thefamily may decide to share the leavebetween the father, grandmother,grandfather or relatives of the child whoare actually bringing up the child. Leavemay be taken either in full or in part, andpersons entitled to this leave mayalternate turns. A maternity (paternity)allowance is granted until a child is oneyear’s old, it is paid by the socialinsurance authority and is equal to85 per cent of the average salary of theemployee.

At the request of a parent bringing upchildren of less than 14 years of age,unpaid leave of up to 14 calendar daysper year must be granted. Parentsbringing up disabled children of lessthan 18 years of age are entitled toannual unpaid leave for up to30 calendar days.

9.3 IllnessAn employee is entitled to sicknessbenefit if sickness occurs during theterm of employment, including anyprobation period, provided he wascovered by the social sickness ormaternity insurance for at least threemonths during the last 12 months, orsix months during the last 24 monthsbefore the sickness.

Employees must obtain an authorisedmedical certificate of incapacity to workin order to receive this benefit. Sicknessbenefit is paid from the third day ofincapacity until a person is able to workor sickness is replaced by disability.The sickness benefit during the first twodays of employee’s incapacity is paid bythe employer.

9.4 Other LeaveEmployees who are studying, takingentrance examinations to colleges andhigher educational institutions understudy contracts with their employer, are

entitled to paid educational leave, withthe pay at the rate of at least theaverage salary. If an employee is takingexaminations or are studying at his owninitiative then his rate of pay for anystudy leave will be determined in anyapplicable collective bargainingagreements or by express agreementwith the employer.

Employees who study in educationalinstitutions are granted study leave toprepare and take regular examinations -three days for each examination; toprepare and take tests - two days foreach test; to perform laboratory workand consultations - as many days asstipulated in educational projects andschedules; to finish and defendgraduation theses - 30 calendar days; toprepare and take state examinations(including the examination for generaleducation secondary school leavingcertificates) - six days for eachexamination.

10. Health and Safety10.1 AccidentsEmployers are liable for their employees’work related accidents including thoseoccurring on the way to or from work orduring and as result of the employment.The employers must have appropriateinsurance.

10.2 Health and Safety ConsultationThe employer has a general duty toensure that employees are provided witha safe system of work and a safeworking environment. This duty issubject to control by the State LabourInspection. Labour inspectors have theright to enter an enterprise at any timeof the day to inspect whether theregulations are observed and, amongstother things, to demand that theemployer stops the works in case theworking environment becomeshazardous to the health or the life of theemployees.

When starting a new business, thepremises in general, as well as theparticular work places, need to becertified as safe and compliant withapplicable hygiene and safe workenvironment standards.


121

A health and safety committee must beset up in any business which employsmore than 50 people. Where there are50 or fewer employees, such acommittee may also be set up byagreement. The committee consists ofequal numbers of employerrepresentatives and the trade union orother employees’ representatives.In case the employer is willing toterminate the employment of a memberof a labour safety committee cannot bedismissed by an employer withoutconsent from the trade union or theemployees.

11. Industrial Relations11.1 Trade UnionsA trade union may be formed by at least30 founders or if in an enterprise,agency or organisation there are at least30 founders or the founders in theenterprise, agency or organisationaccount for no less than one fifth of allemployees but not less that threeemployees.

A trade union is considered to be a legalentity when the following criteria arefulfilled: it has the requisite number offounders, the statutes of the trade unionare approved in general meeting and themanaging body is elected. A trade unionmust lodge documents, testifying itscompliance with the above requirementswith the Register of Legal Persons.

11.2 Collective AgreementsCollective agreements are not popular inprivate enterprises. As a rule, one finds“old” enterprises keeping the tradition ofthe past and in those businessestablished after market liberalisationthere are few collective agreements.Although legislation promotes theconclusion of collective agreements, thenumber of collective agreements has notincreased.

Agreements are legally binding on theparties. The employer has a duty toinform new employees of the contentsof relevant collective agreements.

A collective agreement can include theterms of payment for work, salary rates,benefits and compensatory allowances,conditions of employment,management, labour protection,

organisation of work, safety in theworkplace, work and rest time, andother social and economic factors orguarantees that are not regulated bylegislation.

The collective agreement comes intoforce upon signing unless the agreementprovides otherwise and remains validuntil the deadline set in the agreementor until the signing of a new collectiveagreement. If a fixed term collectivebargaining agreement has beenconcluded, the parties should beginnegotiations for its renewal two monthsbefore the expiry date.

11.3 Trade DisputesA strike is permitted by law in the eventof a collective dispute not being settledor a decision adopted by theReconciliation Commission, LabourArbitration or Third Party Court, which isacceptable to the employees, is notexecuted. The right to adopt thedecision to announce the strike isvested in the trade union.

During a strike, labour contracts ofthose employees taking part in the strikeare suspended. They maintain continuityof employment, length of service, theirentitlement to the state social insuranceand the assurance of safety at work.Employees taking part in strikes do notreceive pay and are exempt fromobligations to carry out their workfunctions.

Lithuanian laws ban lockouts. Theemployer is forbidden to hire newemployees to replace those on strike.


Employees have the right to receiveinformation from the employer. Thisincludes information about the presentand future activity of the employer andits economic and financial status,information about the structure of labourrelations, current and any planned futuredevelopments, and information aboutthe intended measures to be taken inthe event of possible reductions in thenumber of employees and otherinformation connected with labourrelations and activities of the employer,unless this information is considered to

be a state, official or commercial secret.The conditions and procedure forproviding information and consultationsshould be established in the collectiveagreement.

Employees are not entitled to haverepresentatives in the management orsupervisory bodies of the employer.

If there is no trade union in an enterpriseand the employees’ meeting has nottransferred the function of employeerepresentation to the trade union of theappropriate sector of economic activity,the employees may be represented bythe Labour Council. The Labour Councilhas the same competence as the tradeunions, except in relation to thosepowers exclusively conferred upon tradeunions by law (e.g. to organise strikes).


12.1 GeneralThe requirements of Council Directive2001/23/EC of 12 March 2001 on theapproximation of the laws of theMember States relating to thesafeguarding of employees’ rights in theevent of transfer of undertaking,businesses or parts of undertakings orbusinesses are not completelyimplemented. Therefore, there is nolegislative requirement to transfer theemployees from the transferringenterprise to the new employer,however, a transfer of undertaking,business or a part of it may not be alegitimate reason to terminate theemployment relationship.

In order to transfer the employees, theformer employer and the new employeragree on the conditions of the transfer.Furthermore, each individual employeehas to consent to the transfer.

13. Termination13.1 Individual TerminationAn employer wishing to terminate mustensure he has a valid reason fordismissal and complies with the relevantnotice requirements.

13.2 NoticeAs a rule, the employer is required toprovide the employee with written noticeof dismissal two months prior to the



122


dismissal, except in the following caseswhen notice of four months should begiven to:

■ A person who is within five years ofbeing entitled to a full pension;

■ A person under 18 years of age;

■ A disabled person;

■ An employee bringing up childrenunder the age of 14 years.

The Labour Code prescribes certaincases when an employment contractmust be terminated summarily:

■ When a court judgement sentencingthe employee to a criminal penalty,as a result of which he can notcontinue working, becomeseffective;

■ When the employee is deprived of aspecial right to carry out certaintypes of work;

■ At the request of a state body orofficial authorised by the law;

■ When a medical or Disability andWorking Capacity Defining Officeconcludes that the employee is notallowed to perform his employmentfunctions or work;

■ At the request of one of the parents,a statutory representative, doctor, orschool to terminate an employmentcontract of a minor aged between14 and 16 years;

■ Upon liquidation of the employer if itsemployment obligations are nottransferred to another entity.

The employer also has a right toterminate an employment contractsummarily if:

■ The employee carries out workduties carelessly or has otherwiseviolated work discipline, or if he hashad a disciplinary sanction imposedat least once within the previous12 months;

■ The employee has committed onemajor violation of work discipline.

Notice of termination has to be given inwritten form to be effective. The LabourCode, provides that after serving noticeof termination, the employer mustprovide the employee with time off work,during the notice period, the duration ofwhich should be at least 10 per cent ofthe employee’s working time to look fora new job. During this time off theemployee is entitled to his or heraverage monthly salary.

During the entire notice period theemployer has to offer the employee anyavailable positions.

13.3 Reasons for DismissalThe main grounds for terminating anemployment contract are:

■ Agreement between the parties;

■ Expiry of the employment contract;

■ Request by the employee;

■ Reasons outside the employee’scontrol e.g. the employee may givenotice if the employee is notprovided with any work during hiscontractual working hours for over30 successive days, or over 60 daysin aggregate in the last twelvemonths, as well as if the employee isnot paid his full work pay (monthlywage) for over two successivemonths through no fault on the partof the employee;

■ At the initiative of the employer(in the absence of employee fault),if there are serious grounds forterminating the contract, providedthe employee receives a terminationnotice within the established terms(two or four months notice).According to the Labour Code,serious grounds may be related tothe qualification of the employee, hisprofessional capabilities, his conductat work or economical, ortechnological reasons, structuralchanges in the work place, etc.;

■ At the initiative of the employer whenthe employee is at fault, e.g. theftfrom the employer or material breachof work regulations such asmisbehaviour with the customers, etc.

13.4 Special ProtectionThe Labour Code limits an employer’sright to terminate the employmentcontracts of pregnant women andemployees bringing up children.An employee may not be dismissedfrom the date of submitting to theemployer a medical certificate onpregnancy, up to the month after theend of the pregnancy and childbirthleave (subject to certain exceptions).The employer may not terminate anemployment contract of an employeewho is bringing up a child of up to threeyears old, if there is no fault on the partof the employee.

In the case of an employee to bedismissed who is a member of anelective body of the trade union or theLabour Council, the employer has toobtain the permission of the trade unionor the labour council to dismiss theemployee.

13.5 Closures and Collective DismissalsIn the event of dismissal of employeeson economic or technological grounds,or due to the restructuring of theworkplace, the employer must, prior togiving notice of termination, consult withemployee representatives with a view toavoiding or mitigating the negativeeffects of the proposed restructuring.

When an employer proposes to makeredundant within 30 calendar days:

■ 10 or more employees wherean enterprise employs up to99 employees;

■ over 10 per cent of employeeswhere an enterprise employs from100 to 299 employees;

■ 30 or more employees where anenterprise employs 300 and moreemployees, it must give writtennotice to the territorial labourexchange, the municipal institutionand the employees’ representatives.

14. Data Protection14.1 Employment RecordsThe principal piece of legislationregulating data protection issues inLithuania is the Law on Legal Protectionof Personal Data (“LLPPD”). The LLPPD


123

regulates the collection, storage and useof personal data and allows privatepersons to process and use personaldata when this is permitted or requiredby statute or when the affected personconsents. The LLPPD permits therecording, processing and use ofpersonal data within a contractualrelationship, if this is covered by thelegitimate purpose of the contract.There is no specific legislation governingdata protection in the employmentcontext.

The employer, as the data controller, isallowed to process the collected datafor specified and legitimate purposes ina way compatible with those purposes.When processing the personal data theemployer should ensure that data isprocessed accurately, fairly and lawfully,is accurate, and, where necessary forthe processing of personal data, kept upto date, consistent, adequate and notexcessive in relation to the purposes forwhich they are collected and processed,and kept in a form which permitsidentification of data subjects for nolonger than is necessary for thepurposes for which the data werecollected and processed.

14.2 Employee Access to DataThe employee as data subject is entitledto obtain information on the source andtype of his personal data that has beencollected, the purposes of processing,and the recipient to whom the data aredisclosed. Upon receiving an enquiry,the employer, as the data controller,must make a reply and provide theemployee with the requested data.On request, such information must beprovided in writing.

14.3 MonitoringThe Law on Electronic Communications(2004), prohibits the disclosure of thecontent of information transmitted overelectronic communications networksand/or related traffic data without theconsent of the users of the electroniccommunications services. The legislationdoes not explicitly establish to whatextent, and in which cases, thecommunications of the employees maybe monitored by the employer.


Transfer of employee data to thirdparties is generally prohibited, unless theaffected person consents. An employerwho wishes to provide personal data tothird parties must follow mandatoryprovisions concerning data processing.Transmission within the EU is allowed.The transfer of data to a third partybased in a country outside the EU ispermissible only if the country ensuresan adequate level of data protection.



124

Employment and Benefits in the European UnionLuxembourg

Luxembourg1. IntroductionThe employment relationship inLuxembourg is governed mainly byindividual contracts of employment,legislation and collective bargainingagreements. Freedom of contract islimited by various mandatory legalprovisions and particularly by thoseprovisions which have recently beenincorporated into the Labour Code(Code du Travail) (LC). The LC is themost important source of employmentlaw in Luxembourg. Collectivebargaining agreements are anotherimportant source of law and areconcluded in respect of mostundertakings.

In addition, contracts must comply withcustom (Article 1135 of the Civil Code)and internal working regulations.

Disputes are usually resolved in LabourCourts (Tribunal du Travail) from whichappeals lie to the Court of Appeal (Courd’Appel). A special Court deals withissues relating to social security.

Employment contracts are usuallywritten in French, German or English.There is no legal requirement inconnection with the language to beused, as long as the employee canunderstand the content of theemployment contract. In certaincircumstances, in order to admitemployment contracts in evidencebefore a Luxembourg Court or publicauthority, a complete or partialtranslation into French or German mayalso be required.


2.1 GeneralLuxembourg labour law used todistinguish between the employmentcontracts of blue collar, or manualworkers, and white collar, or intellectualworkers. However, this distinction haslargely disappeared, and the status ofboth blue and white collar workers isnow largely indistinguishable as far asemployment rights are concerned.

2.2 DirectorsUnder Luxembourg law, members of theboard of directors are not considered tobe employees as directorship isconsidered to be a corporate mandatefunction.

However, it is possible to hold adirectorship at the same time as havingan employment relationship with thesame company if the director, in additionto his legally defined director’s mandate,holds a specific and technical functionwhich is distinct from the office ofdirector and if for the purposes ofcarrying out the employment functionthe individual is in a subordinaterelationship (“lien de subordination”) withthe company.

2.3 OtherPart-time employees enjoy the samelegal protection as full-time employees.

3. Hiring3.1 RecruitmentThe Constitution guarantees the right towork and the freedom of all citizens toexercise that right. Employers mustreport any job vacancy to the NationalLabour Office and must not recruit on adiscriminatory basis. Reference to thesex of potential employees in jobadvertisements is forbidden.

The employment of disabled people iscompulsory both in the public and theprivate sectors. In the private sector,undertakings with at least 25 employeesmust employ at least one disabledemployee. Undertakings with at least 50employees must employ at least two percent of the workforce from those peopleregistered as disabled. For undertakingswith at least 300 employees, thepercentage rises to four per cent. In anycase, this requirement is subject to theLabour Office being presented with a jobdemand from a disabled person. If theundertaking fails to employ the requirednumber of disabled employees, aspecial compensation tax of an amountequal to half the minimum monthly wageis payable in respect of each disabledemployee who has not been employedin breach of these minimumrequirements.

The law forbids the employment ofpeople under 15 years of age butexceptions to this rule exist in the areaof public entertainment. Young peoplebetween 15 and 18 years cannot beemployed to do certain types of work,for example, assembly line work andpiecework.

3.2 Work PermitsNo foreign worker can be employed onthe territory of the Grand-Duchy ofLuxembourg without a valid workpermit, which has to be issued by theminister of foreign affairs andimmigration. EU nationals and nationalsof member states of the Agreement onthe European Economic Area and theirspouses whether or not EU-nationals(although the latter are subject to certainconditions) are exempt from thisrequirement.

4. DiscriminationLuxembourg law affirms the principle ofequal treatment for men and women asregards access to employment,vocational training and promotion,vocational guidance, advanced trainingand retraining, access to anindependent occupation or profession,terms and conditions of employmentand termination of employment.

In accordance with a Grand-DucalRegulation of 10 July 1974 employersare required to observe the principle ofequal pay for men and women for thesame work or for work of equal value.

All collective bargaining agreementsmust provide for the application of thisprinciple of equal treatment.

Employers are required to takepreventive measures against sexualharassment in the work place.

All direct or indirect discrimination basedon religion or belief, disability, age,sexual orientation, race or ethnicity isprohibited. This prohibition applies,among other things, to access toemployment, promotion, professionalorientation and training, work conditions,including conditions of remuneration andtermination, affiliation to a workers’organisation, social coverage, socialbenefits, etc.


125


5.1 Freedom of ContractFreedom of contract is limited bylegislation. The terms of the employmentcontract cannot be less favourable tothe employee than the provisions of theLC or the provisions of the collectivebargaining agreement.

The modification of an essential clauseto the disadvantage of the employeerequires the employee’s express consentor has to be notified in accordance withthe notice and other obligations thatwould apply to the employer in the eventof the termination of the employmentcontract by the employer. Luxembourglaw does not define “essential clause”and this is a matter to be determined bythe courts, on a case-by-case basis.

After having been notified of theproposed modification of a fundamentalclause of the existing employmentcontract, the employee is entitled torequest the reasons for the proposedchanges. The employer will then have tocommunicate these reasons.

In the event the employee does notaccept the changes, he will have toresign and his resignation will be treatedas a termination by the employer of theemployment contract. In the event thatthe court considers that the amendmentwas not justified, the employee will beentitled to damages

Mandatory provisions of Luxembourglabour law (such as, working time,holidays, part-time work, weekly restperiod, minimum salary and collectivebargaining agreements) must be appliedto all employees performing theiremployment duties in Luxembourg. Thisincludes employees seconded toLuxembourg for a limited period of time,regardless of the duration or the natureof the secondment.

5.2 FormA contract of employment must be inwriting and signed in two counterparts,one of which is given to the employee atthe latest at the time he or she startsworking.

The contract must, as a minimum, statethe identity of the parties, thecommencement date, the place of work,the nature of the employment, thenormal daily or weekly workingschedule, the normal working hours, thebasic salary and benefits, the length ofpaid holiday, the length of the noticeperiod to be observed by the employerand the employee in case of terminationof the agreement, the length of the trialperiod if any, a reference to anyapplicable collective labour agreement,any derogation from the general law(where permitted), the existence andnature of a complementary pensionscheme, if applicable, as well as anyadditional terms that the parties haveagreed upon.

Fixed-term employment contracts arepermitted in certain circumstances only.They may only be entered into for theperformance of a specific and temporarytask such as, for instance, thereplacement of a sick employee, forseasonal jobs, for specific tasks whichdo not form part of the normal activitiesof the undertaking or when there is atemporary increase in activity in theundertaking. Fixed-term contracts canalso be concluded in a sector of theeconomy where it is customary toconclude contracts of a limited duration(e.g. actors, sport coaches…). Fixed-term employment contracts can berenewed twice (if the option of renewalis provided for in the contract or in asubsequent document), but the durationof the contract, including anysubsequent renewals, cannot exceed24 months in aggregate. Such contractsmust specify an expiry date and, if this isnot possible (for example, in the case ofreplacement of people absent due toillness), they must specify a minimumlength and conditions for expiry.Fixed-term contracts that violate theserules are deemed to be contracts foran indefinite duration.

5.3 Trial PeriodsTrial periods function as a mechanismfor both parties to terminate the contracton short notice and without providing areason. Trial periods must be providedfor in writing in the employmentcontract. As a general rule, a trial periodcannot be less than two weeks and

cannot exceed six months. In certaincases, however, the trial period can lastup to 12 months, depending on theemployee’s education and salary.The trial period is not renewable.


Employees have a general duty ofconfidentiality with regard to thebusiness of the employer. In the bankingsector this duty is more specific.In addition to criminal penaltiesapplicable to employees in breach ofrules on banking secrecy, mostemployment contracts in the bankingsector provide that any breach of theconfidentiality obligation is a ground forimmediate dismissal without notice.However, Luxembourg Courts still retainthe power to determine whether thebreach was sufficient to justify animmediate dismissal.

Restrictive covenants are regulated bythe LC. A non-compete clause may onlyprohibit a former employee fromundertaking a competitive activity as anindependent worker within the Grand-Duchy of Luxembourg in the sameindustrial sector in which the individualhad been previously employed and for amaximum period of 12 months only.A non-compete clause may not prohibitthe employee from taking up newemployment. In addition, a non-competeclause will only be valid if on the day theemployee leaves the company theemployee’s annual gross salary is equalto or exceeds EUR 6,817, at the baseindex 100 of the mobile salary scale (agovernment published index, whichdetermines the index applicable tosalaries - see further paragraph 6.1below) (i.e. EUR 45,568.92 as of 1stDecember 2006, the index standing at668.46).

5.5 Intellectual PropertyIntellectual Property is comprised ofseveral aspects, such as designpatterns, copyrights, patents,trademarks and industrial property.

The applicable legislation mainlyconsists of:

■ the law of 13 July 1973implementing the Benelux



126


Convention relating to designpatterns of 25 October 1966, (the“Law of 1973”)

■ the law of 20 July 1992 modifyingthe rules on patent rights, (the “Lawof 1992”)

■ the law of 18 April 2001 oncopyrights, ancillary rights and databases as amended by the law of18 April 2004. (the “Law of 2001”)

If a design pattern has been created bya manual worker or an employee in thedischarge of his duties relating to theemployment contract, the employer isconsidered as its creator, unlessotherwise agreed.

If a computer programme is created byan employee in the discharge of hisduties or under the instructions of hisemployer, the employer exclusively isauthorized to exercise property rightsrelating to the programme, unlesscontractually agreed otherwise.

The property rights of data bases belongto the “producer”. The producer islegally considered to be the physicalperson or legal entity, which takes theinitiative and principally takes the risk toundertake the necessary investments forthe creation of a data base. Thus, inpractice the employer will nearly alwaysbe considered the producer of a data-base and will be entitled to the propertyin it.

Generally speaking inventions made bya person bound by an employmentcontract will belong to the employer ifthe invention is made:

■ during the performance of a contractof employment which encompassesa requirement to make inventions;

■ during a period of study or researchthat the employee is explicitlyentrusted with;

■ during the performance of his or herduties;

■ in the undertaking’s field of activities,

■ as a consequence of the knowledge

or use of techniques or meansspecific to the undertaking or as aresult of data provided by theundertaking.

The employer and employee have todisclose to each other any usefulinformation relating to the invention andhave to abstain from making anydisclosures that could compromise theexercise of the rights granted by the law.

Any agreement between the employerand the employee relating to aninvention of the employee must be inwriting, failing which it may be deemednull and void.

Pursuant to article 13 of the Law of1992, if an employer realises “notableprofits” as a consequence of anemployee’s invention he has to grant theemployee a reasonable portion of theprofits. Failure to do so will allow theemployee to bring an action against theemployer for a share of the profits.

6. Pay and Benefits6.1 Basic PayWages and salaries are determined bythe individual employment contract.They are subject to a minimum salary(salaire social minimum). The minimumdepends on the age and qualifications ofthe employee. As at 1st January 2007,the statutory minimum wage payable tonon-qualified employees over 18 yearsof age is c1,570.28 per month.The statutory minimum wage forqualified workers as at 1st January 2007is c1,884.34 per month.

Employees are normally paid monthly.

In some sectors, collective bargainingagreements provide for remunerationscales, and, in some sectors, requireemployers to pay an additional bonusequivalent to between half a month’sand two month’s salary on top of themonthly basic salary.

Employers may also provide for aperformance bonus, which is normallylinked to the business results.

The minimum wage is regularly adjustedby the Government to take account ofeconomic developments and the cost of

living. Also, all salaries have to beautomatically increased by the employerin line with any rise in the mobile salaryscale index (often referred to as the“price index”, or simply, “the index”)where this index increases by more thantwo and a half per cent.

6.2 Private PensionsThe state social security system isgenerally considered to be adequate.Additional pension and sickness benefitsare therefore rarely provided.

If a private pension is provided, generallyby multinational or large localundertakings, it is usually financedthrough book reserves, pension funds orinsurance, and in some cases throughinformal ad hoc arrangements.

6.3 Incentive SchemesThe promotion of employee shareparticipation has never beenencouraged through legal or fiscalmeasures. However, resident companieshave sought to encourage employeeinvolvement, primarily through annualbonuses related to profits and byoffering shares to employees atpreferential prices.

6.4 Fringe BenefitsFringe benefits vary according to theindustrial sector and the function of theemployee.

6.5 DeductionsEmployers are required to withholdincome tax and social security chargesat source from the salary of theemployee.

7. Social Security7.1 CoverageThe social security system provides ahigh level of benefits, most of which areautomatically linked to the price index.Some of the benefits are earnings-related. The following benefits areprovided: retirement pensions, survivors’benefits, medical care, sickness,disability, unemployment and maternitybenefits, industrial injuries andoccupational disease insurance andfamily allowances.

The state pension after a full careercurrently averages between 65 and


127

70 per cent of final earnings foremployees with earnings below acontribution ceiling defined as five timesthe minimum wage, (i.e. c 7,851.40 asat 1st January 2007). (the “ContributionCeiling”)

The LC sets out rules governing thepayment of unemployment benefits.Workers domiciled in Luxembourg, whohave been employed for at least26 weeks over the last 12 months areentitled, if certain other conditions aremet, to receive unemployment benefitsof roughly 80 per cent of their formergross salary (with an initial cap at twoand a half times the minimum wage. Thecap then gets progressively lower overtime for a maximum period equal to theperiod worked over a reference periodof 24 months.)

7.2 ContributionsBoth employer and employee have tobear the cost of social securitycontributions that are calculated as apercentage of salary up to theContribution Ceiling. The employerdeducts the employee’s share from hissalary on behalf of the tax authorities.The key contributions can besummarised as follows:

Employer EmployeePer cent Per cent

Pensions 8 8

Sickness Insurance 2.8

(5.05 for manual workers) 2.8

(5.05 for manual workers)

Dependency Insurance* 1.4 1.4

Family allowances 1.7 Nil

* Special rules of calculation apply. The 1.4 per centrate is not levied on the whole amount of the grosssalary. There is a special allowance of currently392.57 c.

Unemployment benefits are financedmainly through a solidarity tax payableby both employer and employee.

8. Hours of WorkThe LC defines hours of work as theperiod of time during which theemployee is at the disposal of theemployer. The normal working hours ofan employee cannot exceed eight hoursper day and 40 hours per week.Collective bargaining agreements canestablish different limits as long as theyare lower than the LC thresholds.

If the weekly working hours are spreadover five business days or less, theemployee can be asked to work ninehours per day, provided that weeklyworking hours do not exceed 40 hours.

For reasons of flexibility the LC providesthat employees may work in excess ofeight hours per day or 40 hours perweek or other contractually definedlimits provided that the average weeklyhours over a reference period of fourconsecutive weeks do not exceed40 hours or the maximum specified inthe contract. The reference period canbe extended to 12 months by acollective bargaining agreement.

In that case, a work organisation plan(“plan d’organisation du travail”) (“POT”)covering the entire reference period willbe drawn up by the employer. For anyparticular week during the agreedreference period average hours may notexceed 48 hours a week and 10 hours aday. Work performed beyond the limitsset out in the POT is remunerated asovertime work.

Undertakings can also opt for a mobiletimetable (“horaire mobile”) instead of aPOT. It allows the option of carrying overto the next reference period a specifiednumber of “hours worked in excess” ofapplicable limits. Again, working hoursmay not exceed 10 hours per day and48 hours per week.

The LC working time provisions do notapply to managers (“personnesoccupant un poste de directioneffective”) or senior executives (“cadressupérieurs”) of a company if theirpresence is necessary to ensure therunning and the supervision of thecompany.

Overtime is defined as work performedbeyond the normal daily and weeklyworking hours, i.e. beyond the legal orcontractual limits.

However, if a POT or a mobile timetableis in place in the company, overtime isdefined as any work done beyond thethresholds provided in an applicablePOT or mobile timetable.

Before any overtime work is carried outprior notification to or authorisation bythe Minister of Labour is required.Overtime work will only be sanctioned inthe following exceptional circumstances:

■ to prevent loss of perishable goodsor to avoid compromising thetechnical result of the work;

■ to complete special tasks such asinventories and accounts;

■ in exceptional circumstancesaffecting the public interest, or incircumstances of national danger;

The procedure is as follows: theemployer notifies the LabourInspectorate, outlining the exceptionalcircumstances for the overtime request.The request must also contain theopinion of the staff delegation or, in theabsence thereof, of the staff. Where theopinion is favourable authorisation of theovertime is automatic. In the event of anegative opinion, the Minister of Labourtakes a decision based on the reports ofthe Labour Inspectorate and theemployment administration.

The daily overtime limit is normally twohours but may be more if the work isurgent. Overtime is compensated atrates which depend on the category ofemployee involved: base wageaugmented by 25 per cent for blue-collar workers and base wageaugmented by 50 per cent for white-collar workers. However, overtime hoursmay be compensated by (paid) time off,at an invariable rate of one and a halfhours off for each hour of overtimeworked.

Nightwork is generally permitted, exceptin the case of adolescents (i.e. workersbetween 15 and 18 years of age). Theremuneration for every hour workedbetween 1am and 6am is augmentedby 25 per cent, either in pay or in timeoff.

Article L.333-1 LC exempts pregnant orbreast-feeding women from workingbetween 10pm and 6am at their requestand after consultation with the labourdoctor.



128


In principle work on Sundays isprohibited, but there are a number ofexceptions linked either to the status ofthe employee or the nature of the work.Employees working on Sundays areentitled to their base wage augmentedby 70 percent. Hours worked onSundays may also be compensated bytime off in lieu. Where this option istaken, the employee will only be paid the70 percent augmentation but not thebase wage.

There are currently 10 public holidaysper year. In this respect the lawdistinguishes between blue-collar andwhite-collar workers. If white-collarworkers are required to work on a publicholiday the overtimenotification/authorisation procedureoutlined above must be followed.

If a public holiday falls on a Sunday, aSaturday or on a day the employeewould not have to work, a further day offmust be granted in lieu. Many collectiveagreements provide for customaryholidays (jours fériés d’usage).

Employees working on public holidaysare entitled to their normal salary plusthe remuneration for the hours effectivelyworked, augmented by 100 per cent.(i.e. The public holiday is paid whether itis worked or not. If it is worked, theworker receives in addition twice hisbase wage for the work performed).

9. Holidays and Time Off9.1 HolidaysEmployees in the private sector areentitled to a minimum of 25 days paidholiday per year (Article L.233-4 LC). Theright to days off comes into existenceafter three months of uninterrupted workalthough holiday will actually accrueduring the three-month period.

Collective bargaining agreements usuallyprovide for more than 25 days holiday.

9.2 Family leaveEmployees are entitled to special paidleave days for a variety of reasons, suchas the death of a relative, birth of achild, to move, for a wedding etc.

An employee who has a dependantchild under 15 years of age can also be

granted family leave in case of seriousillness, accident or the critical illness ofthe child that necessitates the presenceof one of the child’s parents. Familyleave cannot exceed two days per childper year.

Subject to certain conditions eachparent is also entitled to parental leave.Parental leave can take two forms:

■ six months full leave (i.e. noprofessional activity is allowed)

■ 12 months part time employmentwithin the company (in agreementwith the company).

Such leave is indemnified by theNational Family Allowances Fund(“Caisse Nationale des PrestationsFamiliales”). The amount of the parentalleave indemnity amounts to 1,778.31.-Euros per month (as at 1st December2006) for full time parental leave.This indemnity is financed jointly by theEmployment Funds (“Fonds pourl’Emploi”) and through the State budget.

Female employees are entitled to 16weeks’ maternity leave, eight weeks ofwhich must be taken before theexpected date of birth.

If the child is born earlier thananticipated, the maternity leave isextended to ensure that the totalmaternity leave period is not less than16 weeks.

If the birth occurs after the expecteddate of birth, employees are still entitledto eight weeks’ maternity leave after thedate of birth.

Maternity leave may be extended by anadditional four weeks in case ofbreastfeeding, multiple births orpremature births.

During maternity leave, employees whohave been affiliated with the SocialSecurity for at least six months continueto be paid benefits by the Caisse deMaladie regardless of the employee’squalification. This benefit is equal to thesickness benefits (see below).

9.3 IllnessEmployees are entitled to sicknessbenefits (“indemnité pécuniaire demaladie”) from the first day of absenceup to a maximum of 52 weeks over areference period of 104 weeks.

For blue collar workers, sicknessbenefits are paid by the Social Securityfrom the first day of sickness. For thefirst three months the employeradvances the payments on behalf of theSocial Security, which then reimbursesthe employer.

For white collar workers, the employerhas to pay the employee 100 per centof his salary for the month in which thesickness arises and for the threefollowing months. In the case ofsuccessive periods of incapacity,interrupted by intervals when theemployee shows up for work, theemployer has to maintain theremuneration for at least thirteen weeksover a period of 12 months.Social Security only starts to paysickness benefits after the employer’sobligation ends, subject to a cap of fivetimes the minimum wage.

10. Health and Safety10.1 AccidentsEmployers are required to insureemployees in respect of accidents atwork. The cost of insurance variesbetween 0.52 per cent and six per centof the salary of the employee up tovarious ceilings.

10.2 Health and Safety ConsultationThe LC provides measures (ArticlesL.311-1 LC and L.321-1 LC) to ensurethe health and safety of workers onindustrial premises and deal with thehealth services in the work place.

Any undertaking employing over 5,000employees (or over 3,000 employees inthe case where at least 100 of them areexposed to the risk of occupationalillnesses or safety risks) is required to setup a company medical service of itsown (“service de santé au travail”).

All other employers have three options:

■ to organise their own companymedical service,


129

■ to join an inter-company medicalservice catering jointly for a numberundertakings, or

■ to use the National OccupationHealth Service (“service national desanté au travail”).

All potential employees must undergo amedical examination with a medicallabour service, to ensure that they are fitfor the position under consideration.

The examination must take place eitherprior to the commencement of theemployment in the case of an “at risk”position (“poste à risque”) or in the twomonths following the recruitment forother positions. In the latter case, shouldthe employee be declared medicallyunfit, the employment contract endsautomatically by operation of law.

The Labour and Mines Inspectorate(“Inspection du Travail et des Mines”),the Ministry of Health, the IndustrialInjuries Insurance Association and theCustoms and Excise Administration areresponsible for ensuring compliance withhealth and safety obligations.

Every undertaking with a staff delegation(“délégation du personnel”) (i.e. anyundertaking with at least 15 employees),must appoint, among its members oramong the other employees of theundertaking, a safety delegate.

The safety delegate carries outinspections of the workplace with theemployer. Fines can be imposed forinfringement of safety regulations.

11. Industrial Relations11.1 Trade UnionsLuxembourg enjoys a very goodlabour/management workingenvironment based on a cooperativearrangement scheme involving thegovernment, labour unions andcompanies. As a consequence, labourunrest and strikes are very rare.

The main trade unions are organisedalong ideological lines. The socialisttrade union (OGBL – OnofhängegeGewerkschaftsbond Lëtzebuerg) and theChristian trade union (LCGB –Lëtzebuerger Chrëschtleche

Gewerkschaftsbond) are the largestunions in Luxembourg and enjoynational representation. Among theunaffiliated unions, the ALEBA isparticularly strong in the banking sector.

The notion of ’trade union’ as well as thecircumstances in which a trade union isconsidered to be representative at anational level or in a major sector of theeconomy are defined under articles161-1 LC and following.

Most employers in the industrial sectorare members of the LuxembourgFederation of Industries (Fédération desIndustriels Luxembourgeois, FEDIL),whereas for example, the interests of thebanking and financial sector arerepresented by the Bankers’ Association(Association des Banques et Banquiers,ABBL).

11.2 Collective AgreementsIf an employer is requested to enter intonegotiations with a view to concluding acollective bargaining agreement, he islegally obliged to do so. Uponexecution, collective agreements mustbe lodged with the Labour and MinesInspectorate. Collective agreementscome into force from the date on whichthey are registered and remain in forcefor a period of between six months andthree years but are deemed to berenewed by tacit agreement. Notice oftermination must be given at the latestthree months before expiry. If notermination has been notified partiesmay decide to renegotiate. In that casethe parties are required to startnegotiations for a new agreement sixweeks before the old agreement is dueto expire.

Collective bargaining agreements can bedeclared generally binding, by means ofa Grand Ducal regulation, in respect ofall employees and employers of thetrade or profession in relation to whichthey are concluded.

Each collective agreement must containcertain mandatory provisions(for example, a bonus for night work,additional compensation for dangerouswork and guarantees of equal pay forboth sexes).

Where an employer refuses to enternegotiations to renew or conclude acollective agreement, the matter isreferred to the National ConciliationOffice (Office National de Conciliation).The National Conciliation Office ispresided by the Minister of Labour. It iscomposed of a joint commission(Commission paritaire) and anadministrative service.

If the conciliation before the NationalConciliation Office fails, the conflict maybe referred to an Arbitration Committee.

In that case, the arbitral decision isassimilated to a collective agreement.

11.3 Trade DisputesThe right to strike is enshrined in theConstitution, although the right is notlegally defined. Before a strike can beimplemented lawfully, the conflict mustbe referred to the National ConciliationOffice. If no agreement is reached, thecase may be heard by arbitrators.Any strike which is started withoutcompliance with the preliminaryprocedure is deemed to be illegal.No strike of any significance has takenplace in recent years.


A staff delegation (délégation dupersonnel) must be set up in all privatesector undertakings which employ atleast 15 people. The size of thedelegation depends upon the number ofemployees: from one delegate forworkplaces with 15 to 25 employees upto 25 delegates in large workplaces.The members of the delegation areelected by secret ballot on aproportional representation basis.The role of the personnel delegation isto protect the interests of the workforcein matters relating to working conditionsand job security.

In those undertakings run byincorporated companies, the employermust inform staff delegates at least oncea year of the economic and financialchanges affecting the undertaking andmust communicate periodically anyother useful information in relation to theactivities of the undertaking.



130


When the number of employeesrepresented by the delegation exceeds500, the law grants a certain number ofdelegates time off to perform their dutieson full salary.

Where there are 150 or more employeesin an undertaking, there is a duty toestablish a Works Council (Comité mixted’entreprise) with an equal number ofemployer and employee representativeswho serve for five years. The law laysdown the procedures and rights of theWorks Council. The employer must informand consult the Works Council at leasttwice a year on the economic andfinancial changes affecting theundertaking. The Works Council must beconsulted specifically on decisions thathave an impact on the structure of theemployer or the level of employment,such as changes in manufacturingprocesses or proposals for collectivedismissals. It decides with the employeron the establishment or modification ofgeneral criteria in relation to staff selection,promotion, rewards, dismissal etc.The Works Council must meet at leastquarterly, or when requested to do so inwriting by 25 per cent of the members.

The European Works Council Directive94/45/EC on the establishment ofEuropean Works Councils (“comitéd’entreprise européen”) has beenimplemented in Luxembourg.The purpose of a European WorksCouncil is to keep employees informedabout and consult with them onstrategic economic and social matters ofa trans-national nature regarding thecompany. European Works Councils arerestricted to large companies employingat least 1,000 people within the EU andEEA and at least 150 people in two ormore EU countries.

The European Company Statute(comprised of the Workers ParticipationDirective and the Company LawRegulation) has been implemented inLuxembourg to provide a framework fornegotiations of the rights of information,consultation and participation of theemployees in the European Company(SE).

In public limited liability companies(“sociétés anonymes”) in which the state

has a financial participation of at least25 per cent or which have had morethan 1,000 employees over the lastthree years, Employee BoardRepresentatives must be elected fromamongst the employees of the company.These employee representatives areelected by the personnel delegates andhave full voting rights. The EmployeeBoard Representatives’ contracts ofemployment cannot be terminated whileholding Board office or for six monthsafterwards, without the approval of therelevant Tribunal. Once elected, they areliable for any management errors theycommit in the same way as other BoardMembers.


12.1 GeneralThe LC (Articles 127-1) provides that inthe event of a transfer of undertaking,existing employment agreements and allrights and obligations arising from theemployment agreement or employmentrelationship are transferred from thetransferor to the transferee by operationof law. A change in the shareholding isnot considered to be a transfer ofundertaking.

Neither the transferor, nor the transferee,nor the affected employees can contractout of this principle, which is a mandatoryrule (“disposition d’ordre public”) ofLuxembourg law. In order to qualify as atransfer coming within the scope of thelegislation the transfer must involve aneconomic entity that retains its identityand comprises an organised grouping ofpeople and assets that facilitate theexercise of an economic activity.

After the transfer, the transferee has tomaintain the same or at least equivalentterms and conditions of employment.If the transferee fails to do so theemployees are entitled to resign andtheir resignation would be treated as aconstructive dismissal that would entitlethem to claim damages in court againstthe transferee.

The transfer of undertaking does not ofitself constitute a valid reason for thetermination of the employee’semployment agreement either by thetransferor or by the transferee.


Transferor and transferee have to informin due time (“en temps utile”) theirrespective staff delegations on (i) thedate the transfer will take place, (ii) thereasons for the transfer, (iii) the legal,economic and social consequences ofthe transfer for the employees, (iv) themeasures that will be taken in relation tothe employees.

If no staff delegation exists within eitherthe transferor or transferee company,the information has to be provided tothe individual employees of the companyin question.

This information has to be providedbefore the transfer of undertakingbecomes effective and in writing.

The transferor is also obliged to informthe transferee of all rights andobligations that will be transferred as aresult of the transfer of undertaking.

12.3 Notification of AuthoritiesA copy of the staff notification letter hasto be sent to the “Inspection du Travailet des Mines”.

12.4 LiabilitiesThe transferor and the transferee are,after the transfer, jointly and severallyliable (obligation solidaire) for thepayment of all amounts that are payableto the affected employees whichbecame due before the date of transfer.The transferor must therefore reimbursethe amounts paid by the transfereepursuant to this obligation, unless acommercial agreement has beenreached in relation to the apportionmentof such liabilities.

13. Termination13.1 Individual TerminationEmployment contracts of an indefiniteduration may be terminated by eitherparty with notice, or with immediateeffect for serious reasons.

13.2 NoticeIn undertakings with at least150 employees, an employer wishing todismiss an employee must have apreliminary discussion with theemployee before terminating the


131

employment contract. At the meeting,the employer must explain the reasonsfor the proposed dismissal. Formalnotice, if it is to be served, must begiven between one and eight days afterthis preliminary meeting.

The termination of the employmentcontract must be notified in writing tothe employee (or the resignation to theemployer) by registered letter (or by wayof a countersignature by theemployee/the employer of a copy of thetermination letter/resignation letter).

Notice periods are as follows:

Length of Service Dismissal Resignation

Under 5 years 2 months 1 month

5 years or over 4 months 2 months

10 years or over 6 months 3 months

The notice period starts to run on the15th of the month if the notice oftermination has been served before thatdate, or on the first day of the followingmonth, if the notice of termination hasbeen served on the 15th of the previousmonth or later.

During the notice period, all the rightsand obligations arising from theemployment contract subsist.The employee will consequently have towork and will be entitled to hisremuneration. The employer maynevertheless free the employee from theobligation to work. The employee musthowever continue to be remunerated.The employee is also entitled to startworking for a new employer. In thiscase, the former employer only needs topay the difference between the formerand the new salary of the employee.

An employer who dismisses withoutcomplying with its notice obligationsmust pay compensation equal to theremuneration for the duration of thenotice period, or the remaining part ofthe period.

Senior executives often negotiate morefavourable notice provisions with theindividual outcome varying according toa number of factors such as age,security, function, the situation of the jobmarket and contractual provisions.

In addition to the notice period,dismissed employees may also beentitled to a departure allowance(indemnité de depart) depending on theirlength of service within the company.To qualify for a departure allowance anemployee must have at least five yearscontinuous employment. If a white-collaremployee has at least five years’ service,he will be entitled to a departureallowance equal to one month’s salaryincreasing to a sum equal to 12 months’salary if the employee has had at least30 years’ continuous service. For blue-collar workers, these departureallowances vary from one month tothree months’ pay, depending on lengthof service.

13.3 Reasons for dismissalThe reasons for the dismissal must berelated to the abilities or the behaviour ofthe employee or to the needs of thecompany.

Where an employment contract isterminated with notice, an employerdoes not have to state the reasons forthe dismissal in the termination letter.

After having received the terminationletter, the employee has a period of onemonth to request the reasons for thetermination of his employment contract.Where requested the employer will,again within one month, have to notifythe employee by registered letter of thereasons for dismissal. The reasons haveto be indicated with precision and mustbe substantial.

Failure to supply written reasons for thedismissal renders the termination unfairresulting in an obligation to paydamages.

Should the employee not accept thereasons that have been notified, he maycommence a court action. The employermust then prove the existence andseriousness of the notified reasons.

In the event of Court proceedings it willnot be possible to rely on any reasonsfor termination other than those notifiedin writing to the employee.

The employment contract can beterminated with immediate effect by

either party for “a serious reason”(“motif grave”). The law defines “seriousreason” as any fact or fault thatimmediately and definitively renders thecontinuation of the employmentrelationship impossible. This usuallyinvolves gross misconduct on the part ofthe employee.

The rules on notice period anddeparture allowance do not apply in theevent of the employment endingbecause of gross misconduct.

The termination must be notified inwriting by registered mail (or by way of acountersignature on the terminationletter). The preliminary discussion, ifrequired, must take place prior to thetermination of the employment contractfor serious misconduct.

The termination letter must indicate theprecise reasons for the dismissal.

If the employer summarily terminates thecontract on the grounds of “motifgrave”, which is not subsequentlydemonstrated or which is notconsidered serious enough to amount to“motif grave” by the labour court, thetermination is considered to be unfair(see below).

There can be a claim for unfair dismissalwhere the dismissal is contrary to thelaw or where the dismissal is not basedon reasons connected with the aptitudeor conduct of the individual or with theoperating needs of the undertaking. Anyclaim for unfair dismissal must belodged within three months ofnotification of termination or of themoment when reasons are given,whichever is later. However, if theemployee submits a written protest tothe employer, he then has a period ofone year within which to lodge the claimstarting from the date of the protest.

The labour court can award damagesfor the loss suffered because of theunfair dismissal and can recommendreinstatement.

13.4 Special ProtectionCertain employees have specialprotection against dismissal.For instance, members of the personnel



132


delegation may not be dismissed unlessthere is a serious fault recognised assuch by the labour court.

The employer’s right to dismiss is alsosuspended in circumstances such asthe absence of an employee due toillness or maternity leave. The employermay dismiss a white-collar employee ora blue-collar worker only after 26 weekshave elapsed from the first day ofsickness, by following the ordinarytermination procedure.

13.5 Closures and Collective DismissalsThe LC defines dismissals as “collective”if a number of employees exceeding aspecific threshold are collectively laid offin a certain period for reasons which arenot related to the behaviour or theabilities of the employees.

An employer who contemplates carryingout collective dismissals must consultwith employee representatives andinform them in writing of the reasons forthe dismissals, the affected categories ofemployee, the number and timing of thedismissals.

The consultation must aim at avoiding,or at least reducing, the number ofdismissals by drawing up a “plan social”.The LC provides for a detailedprocedure and imposes variousdeadlines for the notification of thecollective dismissals as well as for thetimeframe of the negotiations betweenthe employers and the employees’representatives. If the social plan cannotbe agreed a conciliation procedureapplies.

14. Data Protection14.1 Employment RecordsThe collection, storage and use ofinformation held by employers abouttheir employees and workers(prospective, current and past) areregulated by the law dated 2 August2002 on the Protection of Persons withregard to the Processing of PersonalData (“the Data Protection Law”), whichimplements the Data Protection Directive95/46/EC (“the EU Directive”).

The Data Protection Law applies to allforms of capturing, processing anddissemination of sound and image.

Employers, as data controllers, have toensure that personal data are:

(i) processed fairly and lawfully;

(ii) collected for specified, expresslyindicated and legitimate purposesand not further processed in a wayincompatible with those purposes;

(iii) adequate, relevant and notexcessive in relation to the purposesfor which they are collected and/orfurther processed;

(iv) accurate and, where necessary, keptup-to-date; every reasonable stepmust be taken to ensure that datawhich are inaccurate or incomplete,having regard to the purposes forwhich they were collected or forwhich are further processed, aredeleted or rectified;

(v) kept in a form which permitsidentification of data subjects for nolonger than is necessary for thepurposes for which the data werecollected or for which they arefurther processed.

Breach of the requirement to processfairly and lawfully is punished by a termof imprisonment of eight days to oneyear and/or a fine of c251 to c125,000.

In addition, the National Data ProtectionCommission can, amongst othersanctions, order the destruction anddeletion of any data, and prohibit theprocessing of personal data for a limitedduration.

Breach of the Data Protection Lawrequirements may also give rise to civilsanctions ordered by the judge of thedistrict where the processing wascarried out (e.g. discontinuance of theprocessing, temporary closure of thebusiness of the data controller)

14.2 Employee Access to DataExcept in certain specific cases,employees, as data subjects, have theright to access personal data relating tothem and to obtain a copy of suchinformation and the right to correct itwhere inaccurate.

In addition the LC provides that everyemployee has the right to access twicea year, during working hours, the filescontaining data relating to him/her.

Data subjects will in certaincircumstances have a right to object tothe processing of personal data foramongst other things direct marketingpurposes. Data subjects may alsoobject to the disclosure of personal datato third parties and must be informed ofthis right.

14.3 MonitoringThere are specific provisions addressingthe processing of personal data for thepurpose of monitoring employmentactivities. The provisions cover all meansof monitoring and are equally applicableto public and private sector employers.Data processing for the purposes ofmonitoring activities is only allowed:

(i) if it is required for the health andsafety of the employees; or

(ii) if it is necessary for the purpose ofprotecting the company’s assets(e.g. CCTV monitoring for safetyreasons, monitoring of emails,Internet or telephone in the financialsector); or

(iii) if it is required to control themechanical production process; or

(iv) on a temporary basis, in order tocontrol or measure the productivityor performances of an employeewith a view to establishing his or hersalary, if such processing is the onlymeans of determining the exactsalary of the employee; or

(v) if it is carried out in the context of aflexible working hours organisation inaccordance with the law.

In case (i), (iv) and (v), no monitoring maytake place without the approval of theworks council (“comité mixted’enterprise”). The consent of theemployee is ineffective.

Furthermore, the employer must informthe affected employees as well as theworks council, or failing that the staffdelegation (“délégation du personnel”),


133

or failing that again the LabourAuthorities (“Inspection du Travail et desMines”) of the following:

(i) the purposes of the processing;

(ii) the period(s) of time during whichthe monitoring is to be carried out;

(iii) the duration and the conditions inwhich the data will be stored.

The processing and monitoring ofemployees’ activities requires the priorauthorisation of the National DataProtection Commission.

Beyond the scope of data protection oremployment law, there are furthergeneral rules, relating to the secrecy ofcommunication, and the right to privacy.

14.4 Transmission of data to ThirdParties

Under the Data Protection Law transfersof data within the EU are not restricted.

The transfer to a country other than anEU Member State (“Third Country”) ofpersonal data that are subject toprocessing, or that will be subject toprocessing after their transfer, may onlytake place if the recipient countryensures an adequate level of protectionand complies with the provisions of theData Protection Law and itsimplementing regulations. The transfer ofdata to a Third Country, which is notassessed by the data controller asoffering an adequate level of protectionmay however take place in certainconditions, e.g. with the consent of thedata subject.



134

Employment and Benefits in the European UnionMalta

Malta1. IntroductionMaltese Employment Law is essentiallybased on the contractual relationshipbetween the employer and employee,with certain controls being imposed bystatutory intervention. Whereas certainconditions of employment are governedby statute, other conditions such asrestraint of trade are unregulated andparties can therefore agree on whateverterms and conditions are acceptable tothem and are reasonable in the eyes ofthe judicature.

The legal system is a mixed one whereelements of French and Italian Law areamalgamated to form the basis ofMaltese contract law. The legal theoriesapplied by Maltese courts whenexamining cases concerning thevariation of the employment contract, forexample, are heavily influenced byContinental doctrine. For historicalreasons however, the legal systemapplied in modern employment matterssuch as disciplinary action orconstructive dismissal is stronglyinfluenced by Common law practices.

The Employment and IndustrialRelations Act of 2002 (EIRA) (Chapter452 of the Laws of Malta), whichregulates some conditions ofemployment and contracts of service,currently governs Maltese labour law.The Employment and IndustrialRelations Act has in fact amended thepre-2002 legislative position andintroduced the necessary legalframework for Malta to come in line withother European jurisdictions.

Traditionally, collective agreements areconsidered to be binding privateagreements and are enforceablebetween the parties. Many disputesbetween employers and employees aresettled in the Industrial Tribunal whichhas exclusive jurisdiction to hear casesrelating to dismissal, trade disputes andother employment law disputes such asthose related to harassment,discrimination and the observation of theworking time requirements, most ofwhich have originated from Malta’smembership of the European Union.


2.1 GeneralGenerally speaking, employmentlegislation in Malta is equally applicableto employees at every level of theworkplace. As with English legislation,some recent legislation refers to theterm ’workers’ which broadly speakingis a term encompassing employees,agency workers, contract staff and selfemployed persons who are ’dependant’on one particular employer.

A Maltese employee is usuallycategorised as a full timer, a whole timeror a part timer. A full timer is a personwho works an average of 40 hours perweek; whereas a whole timer is aperson who works a number of hoursspecified in an applicable WageRegulation Order. A Wage RegulationOrder (also known as a Sectoral Order)specifies a number of employmentparameters and rights which areapplicable only to a particular sector ofthe employment market (e.g. the FoodManufacturing Wage Regulation Orderof 1991). One of the specifiedparameters is the whole timer weeklyhours rate (usually ranging between20 and 35 hours per week).An employee working in that sector whoreaches that number of hours is entitledto be given the maximum leave andbenefits entitlement as a full timer.

A part-timer under Maltese EmploymentLaw is an employee who works lessthan the full time or the whole timeweekly hours of work. Broadly speaking,part-timers are to not to be treated lessfavourably than full or whole timers in sofar as remuneration and benefits areconcerned. Pro rata calculations andpayments as compared to whole-timersor full-timers are usually applicable topart-timers. Also, under the Part TimeEmployees Regulations of 2002 onlythose employees who work over anaverage of 20 hours a week inemployment with the same employer areentitled to pro rata benefits, leave etc.

A similar right not to be treated lessfavourably also applies to fixed termcontract employees as compared tothose comparable employees employedon an indefinite term contract.

The Companies Act of 1995 regulatesthe position of directors of private andpublic limited liability companies, whomay or may not also be employees ofthe company.

3. Hiring3.1 RecruitmentMaltese Employers recruit through avariety of sources, the most popularbeing advertising in newspapers andfee-charging employment agencies.The Employment and TrainingCorporation (ETC) is a government runagency which provides a freerecruitment service, normally used byemployers to recruit the less senioremployees. Private employmentagencies require a licence to operate.The latter is issued by the Department ofEmployment and Industrial Relationsafter the prospective applicants gothrough an ad hoc application process.

3.2 Work PermitsAs Malta is an island of 390 sq. Km insize, it is necessary to impose certainimmigration regulations to control theinflux of labour within acceptable limits.Accordingly, those who intend to set upshop in Malta, or private individuals whowish to work in Malta, should makereference to the local laws, principallythe Immigration Act of 1970 (Chapter217 of the Laws of Malta) and theImmigration Regulations of 2004 (LN205 of 2004). Although the freedom ofmovement principles in relation tocitizens of the European Union arerespected, the latter will still require awork permit until the year 2010.However, the Maltese governmentcannot refuse work permits for EUCitizens until 2010 unless there is astrain on the local market caused bypersons wishing to come to Malta forwork. As far as non-EU citizens areconcerned, an entry visa may berequired from some countries that donot have a free movement agreementwith Malta (please visitwww.foreign.gov.mt for a list ofcountries which have a free movementagreement with Malta).

The permit for Citizens of the EuropeanUnion can be obtained within ten daysand costs from EUR60 for a permit forone year up to EUR180 for a permit


135

valid for an indefinite term. A Residencepermit for a period of six months isalways given to those Citizens of theEuropean Union who are genuinelyseeking employment or have a genuineprospect of securing employment withinthe six month term. When a Citizen ofthe European Union has obtained awork permit, his dependants (namelyhis/her spouse and children below theage of 21) are given the right ofresidence and also the right to work inMalta upon application for and issue of avalid work permit as described above.

Non-EU citizens always require a workpermit in order to work in Malta. A workpermit can be obtained within threemonths and costs from 60 Euros for apermit for one year up to 132 Euros fora permit valid for three years. If a Non-EU citizen wishes to be employed inMalta, he/she must have a genuineprospect of securing employment beforeentering Malta to work. Once aprospective employer has beenidentified, the applicant will be issuedwith a residence permit that is valid for afixed period (from three to six months asdetermined by the Immigration Police)until the work permit is issued.

Once a work permit has been obtainedby a Non-EU citizen, his dependants(namely his/her spouse and childrenbelow the age of 21) are also given theright of residence and the right to workin Malta upon application for and issueof a valid work permit as describedabove.

4. DiscriminationThe Constitution of Malta and otherMaltese Employment statutes protectemployees from discrimination on thegrounds of sex, religion, race, disability,age and sexual orientation.Discrimination against part-timers andpersons employed on fixed termcontracts is also regulated.

Discrimination in the work place is todayunlawful as far as recruitment, treatmentduring the course of employment andtermination is concerned. Chapter four ofthe Maltese Constitution protectspersons from being discriminated againston a number of grounds in every aspectof life, including work. With the advent of

European Union membership, a numberof anti-discrimination provisions withdirect relevance to the workplace wereincluded in the new Employment andIndustrial Relations Act of 2002 and anumber of statutory instruments wereintroduced in order expand upon thegeneral principles found in EIRA.

Such instruments include the Equalityfor Men and Women Act 2003 whichfocuses on sexual discrimination; theEmployment and Industrial RelationsInterpretation Order of 2003 whichinstructs the Industrial Tribunal to refer tothe European Directives ondiscrimination and the Equal Treatmentin Employment Regulations 2004 whichfocuses on the principle of equaltreatment in relation to religion andreligious belief; racial or ethnic origin;disability; age and sexual orientation.


5.1 Freedom of ContractIt is a basic principle of Maltese Civil lawthat parties are free to contract onwhatever terms they choose. Freedomto contract is however limited bystatutory intervention in that no partiesmay agree to terms that are below theminimum rights granted by statute.The Employment and IndustrialRelations Act 2002 in fact specifies thatif a contract of employment specifiesconditions that are less favourable to theemployee than those specified in the Actor in regulations issued under it; thestatutory conditions shall prevail.

Contracts of employment can beentered into for a fixed term or for anindefinite term. Fixed term contracts orthose entered into for a specified taskcan be entered into as long as theemployee is not continuously employedwith the same employer on a fixed termcontract for more than four years.As soon as the four years are up, theemployee’s contract of employmentbecomes an indefinite one unless theemployer has objective reasons to justifythe renewal of the fixed term contract.Casual employment is also possible.

5.2 FormUnder Maltese Law, every employeemust have a written contract of

employment or a Minimum Statement ofConditions. Such a contract ofemployment may be written or verbal.However, if the contract entered into isverbal, the employer then has eightworking days to give the employeeeither a contract of employment or awritten statement of minimum conditionsaccording to the Information toEmployees Regulations of 2002.Such information includes normal ratesof pay, overtime rates, hours of work,place of work, and a reference to all theleave that an employee is entitled to.

5.3 Trial periodsThe probationary period within which theemployer may terminate theemployment of the employee withoutassigning any reason is set at amaximum of six months for lower gradeemployees. However if the employee’semployment is of a technical, executive,administrative or managerial nature andthe employee’s wages are at leastdouble the minimum wage during thatyear, the probationary period is usuallyset at one year.

5.4 Confidentiality and NonCompetition

Although there are no statutory rulesgoverning confidential information,Maltese Courts have adopted theEnglish doctrine that an employee isbound by a general duty of good faithand a duty not to disclose theemployer’s confidential information.

Although express provisions in acontract may be used to stop anemployee from competing with hisemployer both during and after theemployment, it should be noted thatprovisions which purport to restrictcompetition after termination of theemployment will only be enforceable ifthey are reasonable and the employerhas a legitimate interest to protect(i.e. confidential information or tradeconnections). A restraint can only bejustified if it is in the interests of thecontracting parties. Maltese courts haveemphasised that the limitations of timeand market have to be reasonable withina small area such as the Malteseislands. An ex-employee cannot beforced to leave his country in order topursue his vocation. Also during the



136


term during which a person could beforced not to compete, adequatecompensation must be given to the ex-employee in order for him to observe theterms of the contract. Suchcompensation should be equitable withthe sacrifice made.

A recent decision of the Maltese Courtof Appeal also stated that if any financialpenalty is specified in the contract ofemployment with the intention ofcreating a deterrent or a prohibition onthe freedom of the individual, the penaltyin question will be considered to be nullunless it arises from a specific provisionof the law.

5.5 Intellectual PropertyBroadly speaking according to theCopyright Act, if intellectual property iscreated or discovered by an employeeduring the course of his employment, itwill belong to the employer.

6. Pay and Benefits6.1 Basic PayThere is a national minimum wage of LM59.63 per week (LM 56.72 per week inthe case of young people and traineesaged 17 and LM 55.50 per week in thecase of young people and trainees aged16 and younger).

Lower-grade workers in Malta aregenerally paid monthly on the basis of aweekly wage, although in someindustries it is customary for workers tobe paid “piece-rates” according to theamount of work done. Overtime at x 1.5the normal rate is generally paid inrespect of additional hours worked inexcess of 40 hours a week.

More senior employees are normallypaid monthly in arrears and are notgenerally paid for overtime worked sincetheir remuneration package is deemedto compensate them for any overtimeworked.

Although it is not common for pay to beindex-linked, subject to the nationalminimum wage, there is a legalobligation on employers to increasewages according to a cost of livingindex that is published by the MalteseGovernment annually. This year’s cost ofliving increase was LM 1.75 a week.

6.2 Private PensionsAlthough state pensions are providedunder the social security system, privatepension schemes are increasing inpopularity. Private pension provision maybe by way of an employer-sponsoredoccupational pension scheme, or by anindividual employee’s own personalpension scheme.

The Maltese state pension scheme iscurrently under review and there areplans to incentivise workers (especiallythose below the age of 35) to participatein private pension schemes in order tolessen the burden on the state. Taxincentives for employers wishing to setup occupational pension schemes arealso in the pipeline.

6.3 Incentive SchemesShare schemes are not mandatory inMalta but are increasing in popularitywithin the financial services sectorbecause of the popularity that suchschemes enjoy within similar sectors inother European countries.

6.4 Fringe BenefitsCommon fringe benefits may typicallyinclude private health insurance andcars (for more senior employeesparticularly). Such fringe benefits areusually contractual and employers maynot unilaterally withdraw them.

6.5 DeductionsAlthough generally, according to EIRAemployers are prohibited from makingdeductions from pay, they are obliged todeduct income tax at source throughthe “Final Settlement System” (FSS)scheme. They are also obliged todeduct employees’ National Insurancecontributions (social securitycontributions). Further deductions suchas trade union membership fees oroccupational pension schemecontributions may only be deducted withthe written consent of the employee.

7. Social Security System7.1 CoverageThe single state administered socialsecurity system provides benefits byway of pensions, unemploymentbenefits, family-based benefits, medicalbenefits, sickness and injury benefits.Employers should be aware both of the

costs involved, and of the administrativeburden of some state guaranteedbenefits (for example, sick leave pay andstatutory maternity pay) responsibility forwhich has been devolved to employers.

Health care has, traditionally, beenprovided by the state. However, therehas been an increased use of privatemedical insurance and private medicalinsurance has become an increasinglycommon employee benefit.

7.2 ContributionsAccording to the Social Security Act(Chapter 213 of the Laws of Malta)Employers must deduct fromemployees’ pay National Insurancecontributions payable by employees andmake an employer’s contributions inrespect of each employee.National Insurance contributions arepayable by employees at a rate of10 per cent of earnings between thelower and upper earnings limit which arefixed each year, (for the year 2006/07are LM 57.39 and LM 133.80 per weekrespectively). Employer’s contributionsare the equivalent of the employee’s.

8. Hours of WorkThe usual working week is 40 hours inmost sectors of employment. Specificlimitations on the hours of work areimposed by the Working TimeRegulations of 2003 on the hoursworked each day and each week by“workers” (this includes employees andagency workers). Generally working timemust not average more than 48 hoursper week over a reference period of17 weeks. Manufacturing and tourismindustries have a reference period of52 weeks and Collective Agreementsmay also extend the reference periodfrom 17 weeks up to a maximum of52 weeks. Under the Working TimeRegulations however, a Maltese workermay opt out of the regulations in orderto work more than the 48-hour averagestipulated by law.

Workers are also entitled to a daily restof at least 11 consecutive hours in each24-hour period and a weekly rest periodof not less than 24 hours in any seven-day period. Night workers (i.e. where atleast three hours of daily working time isworked at night as a matter of course)


137

must not work in excess of eight hoursin each period of 24 hours if the type ofwork carried out is particularly strenuous.

9. Holidays and Time Off9.1 HolidaysThe Working Time Regulations of 2003give the employee a right to fourworking weeks and four working days ofpaid vacation leave. Any leave takenbeyond that period is taken at the optionof the employer and is usually unpaid.Annual leave accrues on a pro rata basisfrom the first day of employment. Moneymay not be paid in lieu of untakenstatutory holiday entitlement except ontermination of employment. According tothe National Holidays and other PublicHolidays Act (Chapter 252 of the Lawsof Malta) there are established 14national and public paid holidays perannum. These are to be given over andabove the statutory annual vacationleave.

9.2 Family LeaveSubject to satisfying the necessarystatutory criteria, a woman is entitled to13 weeks’ ordinary maternity leave onfull pay and one week maternity leavewithout pay. If sickness or othercomplications related to the pregnancyand/or birth arise, the employee mayask for up to eight weeks special leaveduring which an entitlement equal to theminimum wage is payable. Any furtherspecial leave is unpaid.

Men and women with one year’scontinuous service are entitled to threemonths’ unpaid parental leave in respectof children under eight years of age.Employees are also allowed 15 hours ofpaid time off to deal with emergenciesarising in relation to persons related tothem up to the first degree.

9.3 IllnessEmployees absent from work by reasonof sickness for more than three dayshave a right to receive sick pay fromtheir employer. The number of days thatmay be taken as sick leave variesaccording to sector. Part of the costmay be recouped from the SocialSecurity Department in that employersmay deduct the benefits that arereceived by the employee from thewages due.

In addition, employees are also entitledto injury leave of up to one year on fullpay. Such benefit is payable by theemployer and may be reduced by theinjury benefit which the employeereceives from the state.

10. Health and Safety10.1 AccidentsEmployers are obliged by theOccupational Health and SafetyAuthority Act of 2000 to safeguard thephysical and psychological well being oftheir employees at any place of work.Breach of the Occupational Health andSafety statutes is a criminal offencewhich may be coupled with a civil suitfor damages. The statutes are coherentwith the European directives in placeand are therefore both general and workspecific.

There are no compulsory employer’sliability insurance rules in Malta, althoughmost employers are insured under suchpolicies.

10.2 Health and Safety ConsultationEmployers in Malta are under anobligation to consult and inform theiremployees on all health and safetymatters. There is no obligation to have ahealth and safety company policy butrisk assessments must be carried out onall types of work. Consultation must becarried out through an elected Workers’Health and Safety Representative or witha Health and Safety Committee.

11. Industrial Relations11.1 Trade UnionsAlthough union membership is strongerin some industries than in others, it caneasily be said that the Maltese workingpopulation is still highly unionised.Major unions include the GeneralWorkers Union (GWU) and the UHM(Union Haddiema Maqghudin) (these aregeneral unions covering various sectors)and the sector specific unions such asthe MUBE (Malta Union of BankEmployees) and the MUT (Malta Unionof Teachers). Employer’s Unions such asthe MEA (Malta Employer’s Association)are also popular.

Although statute regulates the functionsand proceedings of a trade union incertain instances, there is no statute to

regulate recognition. In cases ofrecognition, a majority of memberworkers within a given bargaining unit isusually recognised due to a long-standing custom. Although method ofbargaining is left up to the parties,industrial action and its consequences isregulated by statute.

11.2 Collective AgreementsCollective Agreements are popular in thetraditional sectors of employment suchas manufacturing and tourism and theseagreements usually regulate matterssuch as pay, working hours, holidays,dispute procedures and procedures todeal with redundancy. Collectiveagreements are considered to be privateagreements that are binding on theparties.

11.3 Trade DisputesMaltese Law does not have acomprehensive “strike law” or anyenshrined right to strike. Rather, unionsare granted statutory protection fromliability, which they would otherwiseincur under the tort law, when takingindustrial action pursuant to a tradedispute. It is debatable whether anemployee who takes industrial actionloses the right to pay during that period.It is however unfair to dismiss anemployee who is taking part in “official”industrial action.


There are at present no formalisedrequirements for employee participationin Malta, although some employersoperate share schemes as an additionalremuneration incentive. However,obligations do arise with respect toconsultation and the provision ofinformation to appropriaterepresentatives (these are usually eitherelected employee representatives orrepresentatives of a recognised tradeunion).

The obligations are:

Where a collective redundancy (asdefined in the Collective Redundancies(Protection of Employment) Regulations2002) is proposed to take place within aperiod of 30 days, consultation withappropriate representatives must take



138


place at the earliest possibleopportunity. Minimum time limits forconsultation are laid down and failure toconsult or comply with the time limitsgives the Director of Employment andIndustrial relations the right to issue afine which is equal to 500 Maltese Liriper employee declared redundant.

Employers are required to providecertain information to appropriaterepresentatives upon the transfer of anundertaking as defined in the Transfer ofBusiness (Protection of Employment)Regulations 2002.

Employers must consult with employeeson health and safety matters.Consultation has to be with the Worker’sHealth and Safety Representatives aselected by the workforce or withemployees directly.

Under the European Works CouncilDirective, any undertaking or group ofundertakings with at least 1,000employees in the EU and 150employees in more than one EU statemay have to set up a Works Council ora procedure for informing and consultingemployees at European level. TheDirective has now been implemented inMalta, and while the initial establishmentof the employee negotiating body isquite clearly regulated, subsequentnegotiations are generally up to theparties to regulate.

Following the European Parliament’sapproval of the Workers ParticipationDirective, Malta has implementedlegislation in 2004 in respect of workerinvolvement in the affairs of EuropeanCompanies. This will lead to the regularconsultation of, and provision ofinformation to, a body representing theemployees of the companies that haveformed the European Company, inrespect of current and future businessplans, production levels, managementchanges, collective redundancies,closures, transfers, mergers and so on.

The Maltese government has alsoimplemented the Employee Informationand Consultation Regulations of 2006(which are being phased in over a periodand will be fully implemented in 2008)that will oblige employers who employ

50 employees and above to have asystem of information and consultationwith the employee’s representatives onmatters which are likely to lead tosubstantial changes in the workorganisation or contractual relations.


12.1 GeneralUpon the transfer of an undertaking, thecontracts of employment of thetransferor’s employees automaticallytransfer from the transferor to thetransferee, unless those employees cangenuinely be made redundant.Any dismissal connected with thetransfer will, in principle, be unfair andgive rise to an entitlement to claimcompensation. Changes to terms andconditions of employment by reason ofthe transfer are voidable, even if agreedto by the employees.


When the transfer of the undertakinginvolves 20 or more employees, Section38 (2) of EIRA requires both thetransferor and the transferee to give theemployees’ representatives the followinginformation:

■ The date or proposed date of thetransfer;

■ The reasons for the transfer;

■ The legal, economic and socialimplications of the transfer for theemployees; and

■ The measures envisaged in relationto the employees.

The employees’ representatives are theofficials of a recognised trade union or anumber of employees electedspecifically for the purpose ofnegotiation in relation to the businesstransfer.

The requisite information must beprovided by means of a writtenstatement given to the employeerepresentatives at least 15 working daysbefore the transfer is carried out orbefore the changes in conditions ofemployment of the employees come

into effect, whichever is the earlier.

If the employment conditions of theaffected employees will change as aconsequence of the transfer,consultation on the impact of thechanges has to begin with theemployees’ representatives sevenworking days after the informationstatement is received by therepresentatives. Although statute doesnot stipulate whether a sale andpurchase agreement can be signedbefore the information/consultationobligations are fulfilled, employers arediscouraged from doing so.

12.3 Notification of authoritiesOn the same day that the statement issent to the employees’ representatives,a copy of the statement must be sent tothe Director of Employment andIndustrial Relations.

12.4 LiabilitiesContravention of any of the regulatoryprovisions is a criminal offencepunishable with a fine of LM 500 peremployee affected by the transfer.

13. Termination13.1 Individual TerminationAn employer wishing to terminate theemployment relationship must be carefulto comply with both the statutory andcontractual requirements with regard toreasons for and procedures leading todismissal.

13.2 NoticeStatute lays down a minimum period ofnotice that will apply where the contractof employment does not make anyprovision for notice. Where the contractof employment stipulates a notice periodsuch a notice period will only stand if thenotice is more favourable to theemployee. Notice periods only apply incases of redundancy or resignation.There are no notice periods fortermination for good and sufficient cause(e.g. gross misconduct).

The statutory minimum period of noticedepends on the length of time theemployee has been in employment witha particular employer. The notice cannothowever exceed a maximum of12 weeks. These notice periods apply to


139

all categories of employees irrespectiveof rank.

If an employer prefers that an employeedoes not work his or her notice period,the general practice is for employers topay salary in lieu of the notice period.There are no special formalities formaking such payments (except as to thededuction of tax where required).

13.3 Reasons for DismissalAlthough the employer is always free toterminate the employment, the employermay only do so for a good and sufficientcause or in cases of redundancy. Evenso, the employee may always contestthe redundancy or the actual terminationin the Industrial Tribunal. In cases wherethe employee is engaged on a fixedterm contract, the law stipulates that ifeither party wishes to terminate theemployment before the time stipulatedat law, the defaulting party has to pay tothe other an amount which is equal tohalf the wages that the employee wouldhave earned in the period remaining.Also, according to statute fixed termcontracts may not be terminated on thebasis of redundancy. A fixed termcontract employee who has beendismissed and wishes to contest thedismissal may only do so in if he files asuit in the civil courts as the IndustrialTribunal only has jurisdiction overindefinite term contracts.

Generally, it is accepted that theft,misconduct and a genuine redundancyare a good and sufficient cause fortermination. As with most common lawjurisdictions, the employer must showthat he has a good reason for thedismissal and that a fair and reasonableprocedure must be followed whenimplementing the dismissal.

There is no minimum qualifying periodfor an employee to refer the case to theindustrial tribunal and there is nominimum or maximum cap on the awardthat the tribunals may give. The mostcommon type of tribunal award isfinancial compensation although if theemployee was not in a position of trust,he may ask for, and be granted,reinstatement.

13.4 Special Protection

The same rules apply to dismissalsconnected with pregnancy or maternity,parental leave, health and safety, tradeunion membership or activities, transfersof undertakings, breach of theOrganisation of Working TimeRegulations and making a disclosure tothe proper public authority (“whistle-blowing”) although if the termination isfound to be made for reasonsconnected with the employee wanting toexercise his statutory rights in relation tothe above mentioned topics, thedismissal is statutorily one which isunfair.

13.5 Redundancy and CollectiveDismissals

As stated above, redundancyconstitutes a good and sufficient causefor dismissal and, although it may beapplicable to individual termination, it iscommonly associated with the partial ortotal closure of a business.

Redundancy is not a statutorily definedterm and Tribunals tend to rely on thedefinition as found in the ILORecommendation no. 119 on theTermination of Employment. Theredundancy must therefore be based ona re-organisation of the company or onfinancial difficulties. Statute also defineswhich employees must be maderedundant as the EIRA dictates that incases of redundancy, an employer shallterminate the employment of the lastperson to be engaged in the pool ofemployees affected by the redundancy.

There is no eligibility criterion forredundancy and the law establishes thatthe notice period that is applicable toresignations, also applies in the cases ofredundancy. In some industries theremay be enhanced contractualredundancy packages available butthese usually depend upon the collectiveagreements in place. Employers shouldtake care to comply with applicableconsultation and informationrequirements that are found in theCollective Redundancies Regulations asdescribed under 11.4 above.

14. Data Protection14.1 Employment RecordsThe collection, storage and use ofinformation held by employers about

their employees and workers(prospective, current and past) areregulated by the Data Protection Act2001(DPA), which implements the EUData Protection Directive.

There is currently no Data ProtectionGuidance Note or Code of Practice thatfocuses on employment issues althoughsuch a Code is in the pipeline.Infringement of data protection law canlead to fines and compensation claimsfrom affected employees or regulatoryaction.

Essentially employers, as datacontrollers, are under an obligation toensure that they process personal dataabout their employees (whether held onmanual files or on computer) inaccordance with specified principalsincluding the principles of proportionalityand transparency. It is alsorecommended that the workforce isinformed of any procedure beingimplemented due to the provisions ofthe DPA.

14.2 Employee Access to DataEmployees, as data subjects, have theright to make a subject access request.This entitles them, subject to certainlimited exceptions, to be told what datais held about them, who it is disclosedto and to be provided with a copy oftheir personal data. Subject accessrequests cover personal data held inmanual and electronic records such asemail. There is no regulation on chargeslevied on employees although theauthorities tend to look down upon suchinitiatives.

14.3 MonitoringAlthough there is no direct legislation onthis topic, the monitoring of employeeemail, Internet and telephone usage andClosed Circuit TV monitoring isregulated by the general principlesfounding the DPA. Although there havebeen no decisions on the subject as yet,monitoring is so far permissible providedthat it is carried out in accordance withthe DPA principles in that it should beadequate, relevant and not excessiveand it should be carried out in the leastintrusive way possible. Any adverseimpact of monitoring on employeesmust be justified by its benefit to the



140


employer and/or others.Express employee consent tomonitoring is not usually required,however, employees should be madeaware that monitoring is being carriedout, the purpose for which it is beingconducted and who the data will besupplied to. Where disciplinary action isa possible consequence of anythingdiscovered this too should be madeclear to employees.


An employer who wishes to provideemployee data to third parties must doso in accordance with the DPAprinciples and processing conditions.Where the third party is based outsidethe EEA it should be noted that the DPAprohibits the transfer of data to acountry outside the EEA unless thatcountry ensures an adequate level ofprotection for personal data or one of aseries of limited exceptions apply.


141

The Netherlands1. IntroductionEmployment relations in TheNetherlands are regulated by the DutchCivil Code and a large number ofspecific rules and regulations.In addition, collective labour agreementsmay apply for certain branches ofindustry or at company level.The employment provisions of the CivilCode and the associated rules andregulations lay down various mandatoryrules, which are mainly designed toprotect employees.


2.1 GeneralMany companies use temporaryworkers supplied through specialemployment agencies. Such agencyworkers are employed by the agenciesand are therefore not considered to beemployees of the company using them.Agency workers do not necessarily havethe same employment conditions as theregular employees. As a general rule,agencies are liable to pay temporaryworkers salaries equal to the salariespaid by the hiring company to its ownemployees. Depending on the applicablecollective labour agreement, exceptionsto this rule may apply.

Regulations regarding the position of on-call workers include a minimum level ofpay per call and criteria pursuant towhich the on-call worker is deemed tohave entered into employment with thecompany using his services.

Most provisions of the Civil Code andother employment legislation applyequally to part-time employees. As ageneral rule, employees that work part-time are entitled to be treated on anequal basis with full-time employees,unless objective reasons justify differenttreatment.

2.2 DirectorsThe company’s shareholders’ meeting orthe supervisory board appoints amanaging director (statutair directeur).Managing directors are usually alsoemployed by the company and as such,they are generally protected by the

same rules that are applicable to regularemployees, except in connection withthe termination of the managingdirector’s employment (see furtherbelow).

The activities and obligations ofmanaging directors are regulated by law,the company’s articles of associationand the Dutch Corporate GovernanceCode (issued in December 2003).The Corporate Governance Code,among other things, deals with issuessuch as remuneration, goldenhandshakes and the position ofmanaging directors under employmentlaw. Listed Dutch companies are inprinciple obliged to comply with theCode or, if they do not, explain in theirannual accounts why they deviate fromthe Code.

The annual accounts of all listed Dutchcompanies should include individualdetails regarding salary, compensation,bonuses, termination fees, share optionsand shareholdings of the managingdirectors, past and present.

3. Hiring3.1 RecruitmentState recruitment agencies are notextensively used, and employers are notobliged to inform these agencies of anyvacancies (except for certain workpermit procedures).

Certain collective labour agreementsrequire employers to ensure that acertain percentage of the employer’sworkforce consists of disabled persons.

3.2 Work PermitsEmployers who want to hire non-EEAnationals need to obtain a work permitfrom the Dutch Centre for Work andIncome before these employees areallowed to start working in TheNetherlands. Work permits will inprinciple only be granted if the employerproves that he is not able to fill thevacancy with an equally suitable nationalfrom one of the EEA-countries.There are certain exemptions to thisprocedure, for example in the case ofintra-group transfers. Work permits havea maximum duration of three years.

As at 1 January 2007 employees fromthe Mid and Eastern European countriesthat joined the EU on 1 May 2004(Poland, Hungary, Czech Republic,Slovakia, Estonia, Latvia, Lithuania andSlovenia) require work permits in orderto work in The Netherlands. It ishowever anticipated that thisrequirement will be shortly removed.In the meantime, the work permitprocedure for this group of employeeshas been simplified in respect ofemployment in industries where it hasbeen established that insufficient Dutchemployees are available.

Dutch employees that wish to hireemployees originating from Bulgaria andRomania have to obtain a work permitunder the regular procedure.

3.3 OtherResidence permits must be obtained byforeign nationals for a stay in TheNetherlands of three months or more.Foreign nationals from a number ofcountries also need a temporaryresidence permit in order to be allowedto enter The Netherlands. Residencepermits are, in principle, granted forone-year periods (during the first fiveyears of a foreign national’s stay in TheNetherlands, the residence permitusually needs to be renewed each year).

With effect from 1 May 2006, EUcitizens that intend to stay more thanthree months in The Netherlands needto register with the ImmigrationAuthorities.

3.4 Knowledge Workers ProcedureA separate admission procedure existsfor so-called knowledge migrants.Knowledge migrants are people whocome to The Netherlands from outsidethe EEA for the purpose of paidemployment with a Dutch employer andwho will earn a gross annual income ofat least EUR 46,541 (EUR 34,130 forknowledge migrants of 30 or younger).This new procedure arranges for(temporary) residence permits to begranted in a relatively short timeframe.A separate work permit is no longerrequired. The new procedure can onlybe used if the Dutch employer hasconcluded a so-called covenant with theImmigration Authorities.

Employment and Benefits in the European UnionThe Netherlands


142


4. DiscriminationEmployers should, based on theirstatutory obligation to act as a goodemployer, treat employees equally.Employment law, as well as specificlegislation, prohibits discrimination andprovides for equal treatment.

An employer may not discriminate onthe grounds of sex, religion, lifeprinciples, political persuasion,nationality, sexual disposition, race,marital status, physical fitness, age oremployment status, either directly orindirectly and in general not at any stageof employment (from recruitment,negotiation of the employmentagreement, promotion or training, to thetermination of employment). In somecases discrimination is permitted,provided it can be justified (on objectivegrounds). If for example the gender ofan employee is essential for the position,deviation from the prohibition todiscriminate between men and womenmay be allowed.

An employee may claim damages in theevent of discrimination by the employer.Persons who are discriminated againstand/or parties concerned may bring aclaim before the Equal TreatmentCommittee (“the Committee”).The Committee can also act on its owninitiative. The decisions of theCommittee are not legally binding.However, the Committee can petitionthe Court for a declaration that thediscriminatory act is tortious or for aninjunction to be issued and, in general,Courts tend to follow the decisions ofthe Committee. It is common forindividuals to approach the Court if theCommittee has concluded that therehas been a breach of equal treatmentlegislation.

5. Employment5.1 Freedom of ContractParties are free to negotiate individualemployment agreements within the limitsof mandatory employment legislationand applicable collective labouragreements (if any).

5.2 FormAccording to the Dutch Civil Code, anemployment agreement exists where anemployee personally undertakes work

during a given period in the service andunder the supervision of an employer inreturn for remuneration. The agreementneed not be in writing to be legallybinding. However, certain provisions,such as those relating to non-competition and a trial period, must bein writing. Furthermore, an employermust inform an employee in writing ofthe essential aspects of the employmentwithin one month of the start of theemployment.

Employment agreements can be enteredinto for a fixed or indefinite period oftime. Fixed-term agreements, inprinciple, automatically terminate at theend of the agreed term. Parties mayenter into a maximum of threeconsecutive fixed-term agreements,which together should not last longerthan three years. If the parties enter intomore than one agreement and threeyears have passed, or more than threefixed-term agreements have beenentered into consecutively, the lastemployment agreement will be deemedto be for an indefinite period of time.Consequently, the employmentagreement will not end automaticallyupon the expiry of the extended period,and the applicable regulations in relationto termination (see further below) willhave to be complied with. If the fixed-term agreement provides for interimtermination, this right can only beexercised if the termination regulationsare complied with.

Employment agreements are deemed tobe consecutive if entered into within athree-month period after termination ofthe previous agreement and concludedby the same parties or parties thatappear to be their successors.

5.3 Trial PeriodsParties may agree a trial period,provided that it is agreed in writing.The maximum trial period is twomonths, except in the case of a fixedterm employment agreement for ashorter period than two years (in whichcase the maximum trial period is onemonth). During the trial period, eitherparty can terminate the employmentagreement at any time without notice orthe need for financial compensation.Upon the employee’s request, the

employer must announce the reasonsfor the dismissal to the employee.Reasons of a discriminatory nature are,of course, prohibited.


Employees are subject to an impliedduty of confidentiality in relation to theiremployer’s business and an employermay claim damages if an employeebreaches this duty. In practice, manyemployers include a provision in theemployment agreement in order toprotect their interests. In order for a non-competition clause to be valid, it shouldbe set out in writing between theemployer and the employee.

Restrictions on post-employmentcompetition must be reasonable in time,area and scope and can be set aside oramended by a Court. Non-competitionprovisions are subject to the principle ofreasonableness and fairness and theywill have to be reviewed (and, wherenecessary, renewed) when theemployee’s position within the companychanges, if as a consequence theimpact of the non-competitionundertaking on the employee changes(unless this change of position could beanticipated at the time of accepting theoriginal non-compete undertaking).

It is common to impose a penalty onbreach of the confidentiality and/or non-competition provisions. An employee willnot be bound by the non-competitionprovisions if the employer is liable fordamages arising from the termination ofthe employment agreement.

5.5 Intellectual PropertyIntellectual property created by anemployee in the course of hisemployment generally belongs to theemployer. Patentable inventions andcopyright normally belong to theemployee, unless agreed otherwise.In limited circumstances an employercan be held liable to pay compensationfor patentable inventions and copyrights.Provisions in the employment agreementrelating to the protection of intellectualproperty rights are common in certainindustrial sectors, such as theinformation technology industry.


143

6. Pay and Benefits6.1 Basic PayThe law provides for a minimum wage,which varies according to theemployee’s age. The governmentdetermines the statutory minimum wagebi annually. With effect from January2007 the minimum monthly gross wagefor a full-time employee aged 23 or overamounts to EUR 1,300.80 (excludingholiday allowance). If an industry ortrade-wide collective labour agreementapplies, it will usually contain aremuneration scheme, determining theminimum remuneration. In addition, anemployer is obliged to provide aminimum holiday allowance amountingto eight per cent of the employee’sgross annual salary. Employmentagreements can provide that the holidayallowance is considered to be includedin the agreed salary provided that theagreed salary is at least equal to orhigher than the statutory minimum wageincreased by eight per cent.

It is common practice for wages to beindex-linked. Wages agreed in collectivelabour agreements, and sometimesthose in employment agreements aswell, are linked to the cost of livingindex.

6.2 Private PensionsIn addition to the obligatory statepension scheme (“old age pension”),many employers grant pension benefitsto their employees. There is no legalobligation for employers to makepensions arrangements unless one ofthe approximately 80 mandatoryindustry or trade-wide pensionsschemes applies. The Pensions Act (anew act introduced on 1 January 2007)requires that the pension obligations arefunded through a separate legal entity.This can be a pension insurancecompany, an industry-wide pensionfund, a company pension fund or apension institution seated in anotherMember State. In addition, the PensionAct confers rights on employees inspecified circumstances (e.g. terminationof employment, divorce).

6.3 Incentive SchemesShare option schemes and sharepurchase schemes are a popularincentive instrument, particularly for key

employees. Employees can derive taxbenefits from such schemes, providedthat certain conditions are met. Clausesthat provide that option rights shallautomatically lapse upon termination ofemployment may not always appear fullyenforceable or may result incompensation being payable toemployees upon termination ofemployment. Many employers operatevoluntary profit-sharing plans, whichentitle employees to a bonus related toprofits. Such a bonus is often calculatedas a percentage of the employee’searnings.

In addition, there are tax efficient savingschemes, such as salary savingschemes.

6.4 Fringe BenefitsCompany cars, telephones and laptopcomputers, cost allowances, gifts onspecial occasions (such as anniversariesand jubilees), childcare arrangementsand private health insurance coverageare frequently provided for variouscategories of employees.

With effect from 1 January 2006,employees in The Netherlands areentitled to participate to a life coursesaving scheme (levensloopregeling).Employees who participate in thisscheme, save money from their grosssalary, which can be used exclusively tofinance unpaid leave or early retirement.Employees can save up to a maximumof 12 per cent of their gross salary peryear in a tax-free manner.

6.5 DeductionsWage tax is deducted from pay atsource in accordance with publishedrates. The tax year runs from 1 Januaryto 31 December. The employmentincome tax rates for 2007 are asfollows:

EURO Tax rate

0 to 17,046 34.15%

17,047 to 30,631 41.45%

30,632 to 52,228 42%

over 52,229 or more 52%

Depending on the personalcircumstances of the employee (forexample, marital status), income belowa fixed threshold may be tax exempt.Foreign employees who are assigned to

The Netherlands on a temporary basismay benefit from a tax exemption of30 per cent of their gross salary as atax-free cost allowance, on theassumption that 30 per cent of theirincome will be expressly classified asextraterritorial expenses.

7. Social Security7.1 CoverageThe social security system is split into anational insurance scheme covering allresidents of The Netherlands(volksverzekeringen) and an insurancescheme for employees only(werknemersverzekeringen). Old agepension (AOW), dependent’s pension(ANW), exceptional medical expenses(AWBZ) and child benefits (Kinderbijslag,AKW) are provided by the state withinthe national insurance scheme.The employees’ insurance schemeprovides for benefits in the event ofillness (ZW), disability (WAO) orunemployment (WW).

7.2 ContributionsOn 1 January 2006, a new health caresystem came into effect in TheNetherlands, replacing a nationalinsurance scheme under the SocialHealth Insurance Act (Ziekenfondswet)as opposed to private health insurance.Under the new health insurancescheme, each Dutch citizen pays anominal premium, which depends onthe health insurer of his or her choice.In addition, an income dependentcontribution of 6.5 per cent of theemployee’s yearly income is due (up to amaximum income amount of EUR30,015). Employers are obliged toreimburse this income dependantcontribution to their employees.

8. Hours of WorkAccording to the Working Hours Act(Arbeidstijdenwet), a working weekgenerally consists of 36 to 40 hours,which is equivalent to seven-and-a-halfto eight hours a day in a five-dayworking week. The employer may, withinreasonable limits, require employees towork overtime. In general, overtime iseither paid for or compensated inanother way (for example, by allowingthe employee time off in lieu). In order tobe able to oblige employees to work onSundays, an express agreement must



144


be reached in advance.Various collective labour agreementsinclude provisions on the reduction ofworking hours. With effect from 1 April2007, a ‘new’ simplified Working HoursAct came into force. This introducedrules giving employers greater flexibilityto adjust working hours to thecircumstances within the company orsector.

Employees can request an adjustmentto their working hours after one year ofemployment. Such a request may onlybe refused by an employer on thegrounds of significant business interests.

9. Holidays and Time Off9.1 HolidaysFull-time employees are entitled to aminimum of 20 days’ paid holiday peryear. Collective labour agreements orindividual employment agreementsusually provide for a more generousannual holiday entitlement per year.In addition, there are nine publicholidays in The Netherlands.Accrued but untaken holidays lapsefive years after the last day of the yearin which they were accrued.

9.2 Family LeaveUnder the Employment and Care Act(Wet Arbeid en Zorg), employees areentitled to a number of different forms oftemporary leave; either paid or unpaid.

Pregnant women are entitled to 16weeks’ maternity leave, which must startno later than four weeks before theexpected date of childbirth. Maternitybenefits paid by social security are equalto 100 per cent of the employee’s salary,provided that the salary does notexceed the maximum daily wage. Inpractice, the employee’s salary is oftencontinued during the maternity leave.

The mother’s partner is entitled to twodays’ paid paternity leave, to be takenwithin four weeks of the child’s birth.Paternity benefits are equal to 100 percent of the employee’s salary. However,these rules may be deviated from bycollective labour agreement or anagreement with the employeerepresentation body.

For each child up to the age of eight,each parent is entitled to unpaidparental leave. The basic statutoryarrangement is that the leave will betaken during a six-month period, duringwhich the employee only works 50 percent of his contractual hours per week.A deviating arrangement is possible,unless important business reasonsdictate otherwise. By collective labouragreement, the statutory arrangementcan be further extended.

In the case of adoption or foster care ofa child, the future/foster parents areentitled to four weeks’ parental leave,which should be taken in the periodcommencing two weeks prior to theadoption and ending 16 weeks after theadoption. During this leave, the salarypayments are continued by the SocialSecurity Authorities, up to the maximumdaily wage.

In the event of an emergency,employees are entitled to temporarypaid leave for a few days or hours,depending on to the nature of theemergency.

Employees are entitled to a short periodof leave of no more than ten days a yearto take care of a seriously ill closerelative, during which period theemployee is entitled to 70 per cent ofhis normal wage. However, the employeris not obliged to grant such leave if ithas significant reasons for refusing it.These rules may be deviated from bycollective labour agreement or anagreement with the employeerepresentation body.

With effect from mid-2005, theEmployment and Care Act has alsoconferred an entitlement to long-termcare leave. This type of leave entitles theemployee to take care of a partner, childor parent, who suffers from a life-threatening illness. The leave iscomprised of a maximum of six timesthe employee’s weekly agreed workinghours during a period of 12 months.In principle such leave should be takenin one continuous period and should notamount to more than half theemployee’s agreed working hours perweek.

9.3 IllnessThe employer is in principle obliged topay employees absent due to illnessduring 104 consecutive weeks of illness.During the first 52 weeks of anemployee’s illness, the employer willhave to pay the employee at least70 per cent of his salary up to amaximum of 70 per cent of themaximum daily wage of c172,48 perday for with effect from 1 January 2007.If this 70 per cent payment is less thanthe minimum wage, the employer willhave to supplement the payment inorder to bring it up to the minimumwage. During the second 52 weekperiod of illness, the employer will alsohave to continue to pay at least 70 percent of the employee’s salary. Theemployee is however no longer entitledto receive at least the minimum wagefrom his employer.

Collective labour agreements andindividual employment agreements mayprovide that employers will pay theemployee a percentage of his usualsalary greater than 70 per cent and thepercentage of salary payable may alsovary during the 104 week period.

There is a legal obligation on bothemployer and employee to actively seekto reintegrate the employee into theworkplace. Failure to do so by theemployer may lead to an extension ofthe period during which the employer isobliged to pay the employee’s salary.Failure to do so by the employee maycause the employee to lose hisentitlement to continued salarypayments. Generally, the employmentagreement cannot be terminated duringthe first two consecutive years of illness,except in the case of redundancy.

The risks of payment during illness canbe privately insured.

After two consecutive years of illness,the employee may be entitled to socialsecurity benefits, the amount andduration of which mainly depends on thedegree of incapacity for work of therelevant employee and his or her labourhistory. No entitlement to social securitybenefits exists if the employee after thefirst two years of illness is capable ofearning at least 65 per cent of his or her


145

last earned salary. If, however, theemployee’s earning capacity is between20 per cent and 65 per cent of his lastearned salary, it will be beneficial for theemployee to try to generate income withtheir own or another employer, as thisgenerally increases the social securitybenefit payable to the employee.

For employees with little or no remainingearning capacity and little or noprospect of recovery, permanent socialsecurity benefit is available.

10. Health and Safety10.1 AccidentsEmployers have a duty of care in relationto the health and safety of theiremployees while they are at work.Health and safety rules and regulationsneed to be observed by an employerwhen organising work and byemployees whilst performing work.The Labour Inspectorate is responsiblefor enforcing the law in relation to healthand safety (Arbeidsomstandighedenwet),and is entitled to make binding ordersand/or impose fines on an employer inthe event of violation of the regulations.Employees have the right to cease allwork-related activities and call in theLabour Inspectorate in the event ofserious risk to health and safety.

With effect from 1 January 2007, theWorking Conditions Act was amended.The amendments were intended to leadto a simplification of existing rules andregulations, better compliance withEuropean regulations and a reduction ofthe administrative burdens on theemployer. The government will inprinciple limit itself to creating targetregulations, i.e. regulations that requirethe employer to reach a level ofprotection for its employees that enablesthem to work in a safe and healthymanner. Employers and employees (andtheir representative bodies) will becomeresponsible for drawing up so-calledworking conditions catalogues, whereinthey describe how they intend toimplement the government’s targetregulations. The Ministry of Social Affairsand Employment will perform a checkon these working conditions catalogues,which will determine the referenceframework for control by the LabourInspectorate. The Working Conditions

Act and regulations also containadditional standards with respect toworking conditions that cause seriousrisk to the health and safety ofemployees.

An employee has a statutory right towork in an environment that is free ofcarcinogenic substances (such astobacco smoke). Non-compliance bythe employer with the health and safetyregulations may constitute an economicoffence and theoretically, the employermay even be liable for damages sufferedby the employee due to non-compliance. Employers usually take outinsurance against liability for breach ofhealth and safety obligations.

10.2 Health and Safety ConsultationThe company’s works council (seebelow) has a right to receive informationand to be consulted on matters relatingto health and safety in the workplace.

11. Industrial Relations11.1 Trade UnionsSome 25 per cent of the Dutchworkforce are members of a tradeunion. Approximately 18 per cent aremembers of a trade union affiliated tothe Federation of Dutch Trade Unions(Federatie Nederlandse Vakbeweging –FNV) and a further five per cent to theChristian Trade Union Federation(Christelijk Nationaal Vakverbond – CNV).A small number of employees belong tounions that are members of smallerfederations.

Unions are well organised in themanufacturing industry sector and thesemi-public sector or privatised sectors,but less organised in the service sectorand new technology industries.

The main employers’ association iscalled the VNO-NCW.

11.2 Collective AgreementsTrade unions and employers’organisations may negotiate minimumwages and basic employment rights at anational level for certain branches ofindustry or trade. The agreements thatare reached are used as standards forsimilar bargaining at sector level.In principle, employers may choose thetrade unions that they wish to negotiate

a collective labour agreement with.However, for the purposes ofmaintaining good industrial relations,employers tend to recognise those tradeunions that are strongly represented inthe relevant sector of industry or trade.

The Minister of Social Affairs can declarea particular collective labour agreementto be generally binding on an entiresector of industry or trade.Consequently, the collective labouragreement is applicable to all employeesin that sector, even the employees thatare not a member of a trade union.

11.3 Trade DisputesThe Dutch Civil Code does notrecognise the right to strike. However, inaccordance with international treaties,the right is recognised in certaincircumstances. In general, courts allowstrikes organised by trade unions if theaim of the strike is consideredreasonable and if other means toachieve that aim have been exhausted.Strike action is not common in TheNetherlands.

Picketing is usually unlawful because itis generally considered an unreasonableform of industrial action.


The extent of employee influence in themanagement of a company depends onthe size of the company. In companieswith 50 or more employees a workscouncil must be established. The workscouncil consists of and is elected by thecompany’s employees.

The company’s management will haveto meet with its works council at leasttwice a year to discuss the generalaffairs of the company. If either thecompany’s management or the workscouncil requests a meeting in relation toa social, financial, economic ororganisational matter concerning thecompany, both parties are obliged tocomply with that request.

In addition, the works council must beinformed of and consulted on certaindecisions such as change of control,take-over, closure or reorganisation.The works council will also have to be



146


consulted by the company’smanagement on various intendedfinancial decisions, for examplesignificant financial investments, capitalinvestments and substantial loans to thecompany. The company’s managementis furthermore obliged to consult theworks council on decisions regardingtechnology facilities and importantdecisions on environmental issues.The management of the company willrequire the approval of the works councilfor certain matters relating to workingconditions, health and safety and jobevaluation. The length of the entireconsultation procedure will bedependent on the circumstances(i.e. complexity of the case, timepressure and what is reasonable).

A management decision may not beimplemented for a period of one monthif it was subject to works councilconsultation and the decision wasopposed by the works council, or if therequirements to consult the workscouncil have been neglected. During thisone-month period, the works councilmay appeal to the special EnterpriseChamber of the Amsterdam Court ofAppeal (the “Chamber”). If the Chamberfinds the decision unreasonable, it canrequire the employer to withdraw thedecision, in whole or in part, or to refrainfrom taking any further action pursuantto it. In practice, the Chamber isreluctant to conclude that amanagement decision wasunreasonable. Intervention by theChamber is most likely when there havebeen procedural irregularities. If amanagement decision is subject toapproval by the works council and suchapproval is not granted, themanagement may petition the Chamberfor approval.

In addition, a works council is entitled togive its opinion on the proposedappointment or dismissal of the highestauthority (usually a director) who hasresponsibility, alone or with others, forthe organisation of employment within acompany.

Works councils of companies that aresubject to the large company regime,i.e. companies with an issued capital ofat least Euro 16 million, at least

100 employees and for which a workscouncil has been established, have theright to nominate one third of thecandidates for the supervisory board ofthe company.

The works council has the right to beinformed at least once a year of thewages allocated to the variousemployee positions within the company.

The management of a company with aworkforce of between 10 and50 employees is required to meet withthe employees at least twice a year aswell as upon the request of at least25 per cent of the workforce.The general course of business must bediscussed at least once a year and thecompany’s management must consultthe employees on certain proposeddecisions that may affect at least aquarter of the company’s workforce.


12.1 GeneralDutch law has implemented the EUAcquired Rights Directive. Upon atransfer of a business, the employeesdedicated to this business are inprinciple automatically transferred to theemployment of the transferee on thesame terms and conditions as providedin their employment agreement with thetransferor. In the case of a businesstransfer, employees, or the workscouncil if established, will need to beconsulted on the intended transfer of abusiness.


Companies are generally required toconsult the works council onacquisitions. Collective labouragreements may also impose a duty ona company’s management to consultwith the trade unions and the workscouncil in cases of an intended mergeror acquisition. A works council will haveto be involved at a point in time wherethey can still influence the intendeddecision (i.e. before the signing of - forexample - a sale and purchaseagreement or even a letter of intent).

The Dutch Merger Code (SERFusiegedragsregels 2000) also requires

notification of and consultation with thetrade unions at an early stage ofnegotiations between the parties to atransaction, involving the acquisition ofdirect or indirect control over theactivities of a company (or part thereof)that has a business in The Netherlandsand where one of the parties is acompany (or part of a group ofcompanies) employing more than50 employees in The Netherlands.The relevant trade unions must benotified when negotiations get to astage where parties expect thatagreement will be reached.

12.3 Notification of AuthoritiesThe Merger Committee has to beinformed that the trade unions havebeen notified of a contemplatedacquisition. Failure to inform the MergerCommittee may result in a publicreprimand.

12.4 LiabilitiesThe sanctions for failing to comply withthe Merger Code are twofold: theMerger Committee can either issue apublic statement concerning non-observance of the Merger Code or apublic statement of censure. In addition,an infringement of the Merger Code maygive rise to tortious claims for injunctiverelief and/or compensatory damages,although to date there has been no caselaw on this.

13. Termination13.1 Individual TerminationDutch law provides extensive employeeprotection. Failure on the part of theemployer to observe the rules relating totermination may result in a liability to pay(substantial) damages to the employee.An employment agreement for anindefinite period cannot be terminatedunilaterally except: (i) during the trialperiod; (ii) in case of mutual consent; or(iii) in circumstances allowing theemployer to dismiss the employeesummarily for important reasons, suchas theft.

13.2 NoticeOnce the permission of the Centre forWork and Income has been obtained,the employment agreement may beterminated by giving the minimumstatutory notice, or if a different notice


147

period is agreed, the contractual noticeperiod. The statutory notice period foran employer depends on the length ofservice of the employee. The employershall observe a statutory notice period ofone month for employees with less thanfive years of service and an additionalmonth for every period of five years’service. The maximum statutory noticeperiod of four months applies if theemployee has been employed for15 years or more. The statutory noticeperiod for the employee is one month.

In order to be valid, a notice perioddiffering from the statutory notice periodhas to have been agreed in writing andthe employer’s notice period must be atleast twice as long as the notice periodthat the employee is required toobserve. The maximum contractualnotice period that can be agreed is12 months for the employer and sixmonths for the employee. Notice oftermination should be given in such amanner that the employment agreementterminates at the end of a calendarmonth. No notice has to be given if theCourt terminates the employmentagreement. In such cases theemployment automatically terminates onthe date stipulated by the Court. If theemployment is terminated through theCentre for Work and Income the noticeperiod can be reduced by one month,subject to a minimum notice period ofone month.

13.3 Reasons for DismissalExcept where the case involves one ofthe three exceptions outlined above, anemployer who wishes to terminate anindividual employment agreement needsto obtain the permission of the Centrefor Work and Income before notice oftermination can be validly given.The request for permission must statethe reasons for the intended termination.Various guidelines issued by the Centrefor Work and Income determine thecircumstances in which permission canbe expected to be given. In practice, thereasonableness of the grounds fortermination is the main criterion.Permission will usually be given if theemployer is forced to reduce itsworkforce, when the workingrelationship has deteriorated or whenthe employee has proven to be

incompetent. The procedure forobtaining permission generally takes twoto four months. The Centre for Workand Income has no authority to orderthe employer to pay compensation,however in practice approval may bewithheld if appropriate compensation isnot offered. After any dismissal, whetherlegally valid or not, an employee mayinitiate Court proceedings in order toobtain compensation, or highercompensation, from the employer on thebasis that the termination was’apparently unreasonable’.

Alternatively, each party to anemployment agreement is at all timesentitled to petition the Court to terminatethe agreement. The Court will examinethe reasons given for termination, thefairness of the proposed termination andthe consequences of continuation ortermination of the employmentagreement for the employee. The Courtmay award compensation to theemployee. Such a Court decision is notsubject to appeal unless the Courtmisjudged the applicability of theprocedure or violated fundamental rulesof law in its judgement. In the case oftermination of an employmentagreement by the Court, an employeewill be subject to a cut in his stateunemployment benefits, up to anamount equal to the salary over theapplicable notice period.

Corporate managing directors (statutairdirecteuren) have less protection in theevent of termination of theiremployment. Once their corporaterelationship has been validly terminated,notice can be served without a dismissalpermit from the Centre for Work andIncome or Court interference. Case lawillustrates that termination of thecorporate relationship cannot bedistinguished from the termination of theemployment relationship. Directors areentitled to the same level ofcompensation as that payable to regularemployees.

In order to determine the amount ofcompensation upon termination of theemployment (other than for fundamentalbreach or as a result of expiry of theterm), the Cantonal Court formula isgenerally applied. According to this

formula, the amount of compensation isdetermined by the employee’s age andyears of service. For each year ofservice until the age of 40, an employeeis entitled to one month’s salary.For each year of service between theage of 40 and 50, an employee isentitled to one and a half month’s salaryand an employee is entitled to twomonths’ salary per year of service fromthe age of 50. In principle, thiscalculation method applies when thereasons for the dismissal are neutral,meaning that none of the parties inparticular can be blamed for thedismissal. The neutral formula applies,among other situations, in case ofdismissal for economic reasons. In somecircumstances payment in accordancewith the neutral formula may be deemedinsufficient. In such cases the sumpayable under the neutral formula couldbe doubled or even tripled.Occasionally, circumstances lead to nopayment of compensation or paymentequal to 0.5 times the neutral formula.This is possible if the employee is largelyto blame for the dismissal or when theemployer has insufficient funds to paycompensation.

The Civil Code provides examples ofcircumstances justifying a summarydismissal without compensation. If anemployee disputes the summarydismissal, it is a matter for the Court todecide whether there is sufficient reasonfor the employer to summarily dismissthe employee without compensation.The employer cannot validly pre-determine in the employment agreementwhat conduct it considers grossmisconduct. The reasons for thedismissal must be communicated to theemployee immediately after they havebecome known to the employer and asummary dismissal should be effectedas soon as reasonably practical after therelevant event, although the employer isentitled to take time to investigate thespecific circumstances.

13.4 Special ProtectionCertain categories of employees arespecially protected against dismissal,such as pregnant women, members andformer members of the works counciland employees absent by reason ofillness.



148


13.5 Closures and Collective DismissalsAn employer contemplating a dismissalof 20 or more employees within thesame region in any three-month periodmust notify the Centre for Work andIncome and the relevant trade unions ofthis proposal. Furthermore, the employershall provide the Centre for Work andIncome and the relevant trade unionswith a list of the employees that will bedismissed. In order to give the tradeunions and the works council theopportunity to discuss the socialconsequences of the redundancies, theemployer must not take any action toeffect any individual dismissal during aperiod of one month after notification,unless the trade unions declare that theyhave been consulted already. In practicethis means that parties try to agree to asocial plan, although the law does notrequire an employer to draw up a socialplan, nor does the law require that thecontents of a social plan are agreed withthe relevant trade unions or the workscouncil.

If the reasons given for the dismissal areaccepted, the Centre for Work andIncome usually grants its approval toterminate the individual employmentagreements within four to eight weeks(after the end of the one-monthconsultation period). The Centre forWork and Income can grant approvalwithin approximately two weeks ifeconomic grounds are the reason forthe collective dismissal and theemployees only formally object to theirdismissal but do not put up a defenceon the merits of the application for theapproval to terminate.

14. Data Protection14.1 Employment RecordsThe collection, storage and use ofinformation held by employers abouttheir employees and workers(prospective, current and past) areregulated by the Data Protection Act2001 (“DPA”), which implements the EUData Protection Directive.

The term ’personal data’ means anydata relating to an identifiable naturalperson. The term ’processing’ coversvirtually all actions performed onpersonal data, from collection untildeletion of the data.

Relevant matters for employers that arecovered by the DPA vary from, forexample, the processing of personaldata for salary administration to themonitoring of the employees’ use of thetelephone, Internet and e-mail facilities.

Employers are generally advised toensure they have some sort ofdocument retention policy in place andto ensure that the employees are awareof their data protection obligations.

Under the DPA, the processing ofpersonal data is permitted only if theprocessing is based on one or more ofthe limited grounds listed in the DPA.For commercial organisations therelevant grounds are likely to be that:

■ the employee has unambiguouslyconsented to the processing of itspersonal data;

■ the processing is necessary toperform an agreement to which theemployee is party, or in order to takesteps at the request of the employeeprior to entering into an agreement;

■ the processing is necessary forcompliance with a legal obligation;

■ the processing is necessary for thepurposes of legitimate interestspursued by the employer or by thethird party to whom the data isdisclosed, except where suchinterests are overridden by theinterests or fundamental rights andfreedoms of the employee. In otherwords, the employer is allowed toprocess personal data of theemployee, unless the employeewould be unduly prejudiced.

The processing of sensitive personaldata (i.e. data relating to a person’sreligious or philosophical beliefs, race,political opinions, health and sexual life,trade union membership or criminalbehaviour) is subject to stricter rules.The general rule is that such data maynot be processed. There are, however,several specific and some generalexemptions to this rule.

In principle, all processing of personaldata must be notified to the Dutch Data

Protection Committee (which is theDutch data protection supervisoryauthority), prior to the collection of thepersonal data. Depending on whatpersonal data will be processed and forwhat purposes, the data processingmay be exempt from notification underthe Dutch Decree on StandardisedExemptions.

The employer is required to implementappropriate technical and organisationalmeasures to guarantee that itsemployees’ personal data is keptsecurely. Specific protection should beput in place to prevent the unauthoriseddisclosure of and access to personaldata. For example, employers mustensure that access to personal datawithin the organisation is restricted toemployees whose job descriptionobjectively requires them to haveaccess.

14.2 Employee Access to DataPrior to the collection of personal data,the employer must inform its employeesof (i) the contact details for queries andrequests and (ii) of the purposes of theintended data processing. Depending onfactors such as the sensitivity of thedata in question and whether personaldata will be internationally transferred,the employer is required to provide moredetailed information in order to ensurethat the processing is carried out in anappropriate and careful manner. Underthe provisions of the DPA, employeeshave the right to periodically ask theemployer to be informed whether his orher personal data are being processedand to receive an overview of the dataprocessed.

The employer could, for example,provide the necessary information byattaching a data protection policy to theemployment agreement (ideally, theemployment agreement would contain adata protection clause referring to thispolicy). For the sake of clarity, it cansometimes be advisable to use differentprivacy policies, for example a generalprivacy policy explaining theorganisation’s general approach towardsprivacy and a separate privacy policyspecifically aimed at the monitoring ofemployees.


149

14.3 MonitoringMonitoring employee’s telephone calls,electronic communications and internetaccess by an employer is only allowed ifcertain conditions are met (including theobligation to inform the employee thathis activities are monitored). Electroniccommunications of the works councilregarding their activities may not bemonitored. Guidelines have been issuedby the Dutch Data Protection Committeeregarding the monitoring of employeeemail and internet use, which, althoughnot legally binding, are intended toprovide “assistance for employers andemployees in formulating a companypolicy with respect to the monitoring ofthe use by employees of email and theInternet in accordance with privacy law”.

The employer should request the priorconsent of the works council, if any,before any policy regarding themonitoring of telephone calls, email andinternet use can be introduced.

14.4 International Transfers of PersonalData

There are additional requirements thatneed to be observed if personal data isto be transferred from EU countries tocountries outside the EU. In principle,such transfers may only take place if thecountry of destination offers anadequate level of protection for thetransferred data. (e.g. the US is notdeemed to provide an adequate level ofprotection and transfers of personal datato the US are, consequently, notallowed). There are, however, ways tolegitimise international transfers, even ifan adequate level of protection is not inplace in the country of destination.Transfers within the EU are notrestricted.



150

Employment and Benefits in the European UnionPoland

Poland1. IntroductionThe principal source of law regulatingemployment relationships in Poland isthe Polish Labour Code of 26 June1974 (the “Code”). It should be stated,however, that specific employment lawprovisions in other legislation prevail overthe provisions of the Code. The Polishgovernment has substantially amendedthe Code in order to implementnumerous EC directives.

Poland is also a member of theInternational Law Organisation and it hasratified various international agreementsregarding labour law, e.g. regardingunemployment, work of women andjuveniles, freedom of trade unions andaccidents at work.

Collective agreements are legallyenforceable and are of someimportance. Collective agreements orinternal rules of employment mayprovide for different, more favourable,working conditions for employees thanthe provisions of the Code.

Disputes between an employer and anemployee are settled in specialistdivisions of the regular courts. The courtof first instance is called Sąd RejonowyWydział Pracy (District Court LabourDivision), the appeal court is referred toas Sąd Okręgowy Wydział Pracy (CircuitCourt Labour Division). Sometimes theLabour Division is combined with theSocial Security Division. There arespecial provisions in the Polish Code ofCivil Procedure governing the resolutionof disputes under employment contractswhich are designed to provideprotection for the employee and enablethe employees to receive help quickerand in the most cost-efficient manner.

In general, under Polish law, it is notpossible to contract out statutoryemployee protection. What is more, theCode states expressly that if thecontractual provisions of the employmentcontract are less beneficial to theemployee than the Code’s provisions, thecontractual provisions will be consideredvoid and in this respect more beneficialprovisions of the Code will replace them.


2.1 GeneralEmployment contracts may be executedfor an indefinite period of time, for afixed term and for the period ofperforming specified work. All of theabove can be preceded by a trial periodemployment contract, which cannotexceed three months.

Polish law does not differentiatebetween blue-collar and white-collaremployees.

3. Hiring3.1 RecruitmentEmployers recruit through a variety ofsources, including through the Internetand by advertising in newspapers orjournals.

Private recruitment agencies andtemping agencies are used for sometypes of employees, for example,secretarial staff. Private recruitmentagencies do not require any licencesbefore they can operate, but they haveto be recorded in the register maintainedby the Labour Minister.

3.2 Work PermitsThe Polish law in relation to workpermits is highly complex, accordinglyonly a high level overview of the legalposition is set out below.

Citizens of all the European EconomicArea countries have free access to thePolish labour market.

The employment of foreigners, with theexception of EEA countries, in Poland isregulated by the Act on Promotion ofEmployment and Labour MarketInstitutions of 20 April 2004.

Under the provisions of this Act, aforeigner is allowed to carry out work inPoland only if the employer obtains aconditional permit (the “ConditionalPermit”). This is a documentguaranteeing the foreigner a work permiton the condition that the foreignerobtains an appropriate visa or aresidence permit for a specified periodof time. Both permits are issued by theVoivodship Governor (maszałekwojewództwa) appropriate to the place

of the employer’s registered place ofbusiness.

The Conditional Permit constitutes thebasis for the foreigner to apply to aPolish embassy or consulate for a visafor the right to reside in Poland with theright to work or to the Voivode for aresidence permit for a specified periodof time. After the visa or the residencepermit is obtained, the VoivodshipGovernor issues the Work Permit.A number of documents must beattached to the applications forConditional Permit and for the WorkPermit (the relevant list can be obtainedin the Voivodeship Employment Office).

A Work Permit is issued for the period oftime specified in the Conditional Permit,but for no longer than the duration ofthe appropriate visa or temporaryresidence permit.

The employment agreement (or anysimilar agreement) may only be enteredinto for the period specified in the WorkPermit. The Work Permit may berevoked by the Voivodship Governor if,for example, the conditions of the permitare breached or if the employee losesthe qualifications necessary to carry outthe specific type of employment(e.g. driver’s licence). In such cases, therelevant agreement must be terminatedas soon as possible.

Foreigners who have permanentresidence or refugee status in Poland (ora permit for a so-called “tolerated stay”in Poland or for providing temporaryprotection) or in certain circumstancesare relatives of a Polish citizen do nothave to obtain a Work Permit. There area number of additional exceptionsincluding a key exception for foreignerswho are permanently resident abroadwho are members of the managementboard of a legal entity (including limitedliability companies and joint stockcompanies), if they work in Poland nomore then 30 days in a calendar year.

The nationals of countries with whichthe EU has signed Free Movement ofPersons Agreements do not have toobtain work permits. Also, employeesemployed by foreign employers who areseconded to work in Poland do not


151

need a work permit provided that all theconditions of secondment described inDirective 96/71/EC.

An employer is obliged to pay a workpermit fee the equivalent of one month’sguaranteed minimum salary into aspecial fund. The guaranteed monthlysalary is approximately PLN 936 (withsome exceptions). When a permit isextended, this fee is halved. Illegalemployment (i.e. without a Work Permitor in breach of its conditions) ispenalised by fines of at least PLN 3,000for the employer and at least 1,000 PLNfor the employee. Moreover, theemployee may be deported from Poland(the deportation costs are borne by theemployer).

4. DiscriminationDirect or indirect discrimination on thegrounds of sex, gender, age, disability,race, religion, nationality, sexualorientation, ethnic origin, political views,membership of any kind, is forbiddenwhen hiring employees, whether foremployment for a fixed or indefiniteterm, full time or part time.

The employer is expressly obliged toactively prevent such discrimination aswell as any harassment or intimidation.

Under Polish law harassment andintimidation means action or behaviourtowards an employee or directedagainst an employee, that involvespersistent and long-lasting badgering ofan employee or threats to an employeecausing him/her to have a lower senseof professional worth, ridiculing anemployee or humiliating him/her,ostracizing or eliminating him/her fromthe team of his/her colleagues.


5.1 Freedom of ContractGenerally, parties are free to contract onwhatever terms they choose and agreeon. However, there are some provisionsthat have to be included in everyemployment contract as a matter of law(e.g. place of work, working hours,remuneration, scope of workobligations). The requirements cannot becontracted out of by the parties.

5.2 FormEmployment contracts have to beconcluded in writing. If they are not, theemployer is obliged to inform anemployee in writing of the basic termsand conditions of employment withinseven days of the date the employmentcontract is concluded. However, a failureto comply with this requirement doesnot render the contract invalid or void.

If the employer does not confirm anemployment contract in writing, it maybe fined up to 5,000 PLN.

5.3 Trial PeriodsUsually the parties decide on the lengthof a trial period which cannot exceedthree months.


An employee is obliged to perform thework conscientiously and carefully, andto abide by the instructions given by theemployer. He is also obliged to look afterthe interests of the employer, protect hisproperty and to keep confidential anyinformation the disclosure of whichcould result in damage to the employer.

The employer may, and often does,conclude a separate non-competecontract for the duration of theemployment contract. The generalframework for non-compete provisionsis set out in the Code. There are inaddition other legislative provisions, forexample in the Unfair Competition Act,which regulate the content of non-compete provisions. In general, anemployee can neither directly undertakecompetitive activities himself norprovide, indirectly by any meanswhatsoever, services for the benefit ofany institution or entity that competeswith his employer.

When an employee has access to vitallyimportant information the disclosure ofwhich could result in damage to theemployer, the parties to the employmentcontract can conclude a non-competition contract that will also bebinding after the termination or expiry ofthe employment contract. The non-competition contract should set out theduration of the obligation and provide forcompensation to be payable to the

employee. Regardless of its duration, anon-competition contract will cease tobe binding once the reasons for itsconclusion cease to exist or if theemployer fails to pay compensation tothe former employee.

The amount of compensation cannot beless than 25 per cent of the remunerationreceived by the employee under theemployment contract during the currencyof which the non-competition clause isdeemed to be in effect.

5.5 Intellectual PropertyUnder Polish law, unless theemployment contract providesotherwise, the employer is entitled toany intellectual property rights that theemployee creates as result of performinghis employment contract.

6. Pay and Benefits6.1 Basic PayThere is a national minimum wage ofPLN 936 per month (this isapproximately c234). It is renewed on anannual basis.

There are no legal obligations onemployers to increase wages. However,collective agreements or work rulesapplicable may provide otherwise.

Public administration employees havetheir wages increased annuallyaccording to the annual inflation rate.

6.2 Private PensionsPrivate pensions schemes are of someimportance, but for the time being themost common are state provisions.

Submitting contributions to the StateSocial Security Fund is compulsory forevery employer, regardless of its legalstatus. An employee is entitled toreceive a state pension from the pensionfund. The amount of the pensiondepends on various factors (e.g. theduration of contribution and non-contribution periods, the amount ofcontributions paid by the employer).

The contribution that is paid by theemployer is split into two parts - one ofthem is transferred to the Social SecurityFund and the other to a private openpension fund chosen by the employee.



152


Apart from the pensions from the SocialSecurity Fund, the employee mayreceive a pension from private pensionfunds if he has paid premiums into therelevant private pension fund himself.

6.3 Incentive SchemesThere are different types of incentiveschemes in Poland. They may operateon a quarterly or annual basis be linkedto market share, revenue increase, PTI(pre-tax income) results and so on. Eachemployer devises the terms of itsincentive schemes, if any, according toits requirements.

6.4 Fringe BenefitsCommon fringe benefits typically includeprivate medical insurance for treatmentoutside the national health service andcompany cars. Generally, such fringebenefits are ex gratia.

6.5 DeductionsEmployers are obliged to deduct incometax at source. They are also obliged todeduct insurance contributions (socialsecurity contributions).

7. Social Security7.1 CoverageThe state-administered social securitysystem provides benefits by way ofpensions, family benefits andcompensation benefits.

There are the following social securitybenefits:

■ pensions; and

■ sick pay, accident at work,rehabilitation, maternity andcompensation benefits.

Employers and employees are obligedto pay certain contributions with respectto social security benefits. Thesecontributions are paid to the SocialSecurity Fund (or an accident fund thatis a part of the Social Security Fund).

7.2 ContributionsThe level of an employer’s contributionsdepends on the amount of anemployee’s remuneration.

Employers must deduct from anemployee’s remuneration the employee’s

own insurance contributions and inaddition, must pay the employer’scontributions in respect of the employee,i.e. the contributions are divided equallyby employers and employees.

Employers’ social security contributionsare as follows:

■ 9.76 per cent of the remuneration ispaid in relation to the pensionsbenefits;

■ 6.5 per cent of the remuneration ispaid in relation to disability pensionsbenefits; and

■ 2.45 per cent of the remuneration ispaid in relation to sickness benefits.

8. Hours of WorkThe normal working week is 40 hours(eight hours per day in a five dayworking week). This can be increased toup to 48 hours a week.

9. Holidays and Time Off9.1 HolidaysIn Poland, there are ten public holidays.These include New Year’s Day, EasterMonday and Christmas. All workers areentitled to a minimum of 20 days’ paidannual leave, which accrues on a prorata basis from the first day ofemployment up to 10 years’employment. Employees with more than10 years’ service are entitled to 26 days’paid annual leave.

9.2 Family LeaveSubject to satisfying the necessarystatutory criteria, a woman is entitled to18 weeks’ maternity leave for the birthof her first child, 20 weeks’ leave for anyfurther children and 28 weeks’ leave fora multiple birth.

A woman is entitled to maternity pay of100 per cent of her remuneration duringthe period of maternity leave. Maternityand paternity pay is funded by the State.

A man is entitled to paternity leave(eight or 16 weeks) if he assumesresponsibility for bringing up somebodyelse’s child and wants to adopt it. He isentitled to paternity pay of to 100 percent of his remuneration during thepaternity leave period.

Both parents are entitled to three years’unpaid childcare leave until the child’sfourth birthday.

9.3 IllnessEmployees absent from work by reasonof ill-health or injury are entitled to sickpay. Sick pay amounts to 80 per cent ofthe employee’s remuneration. Theemployer pays sick pay for an aggregateof 33 days’ illness during the year. Afterthis, sick pay is paid by social security.

10. Health and Safety10.1 AccidentsEmployers are under a duty to haveregard for the health and safety of theiremployees while at work (and travellingto or from work), and are obliged bystatute to take out insurance againstliability for occupational injuries anddiseases.

Generally, employers are obliged toprevent accidents at work. In the caseof an accident at work, an employer isobliged to provide first aid and eliminatethe source of danger. Employers mustmaintain an accident register.

In the case of serious, lethal or groupaccidents, the employer should informthe Labour Inspector and the prosecutorof them.

10.2 Health and Safety ConsultationThe employer should provide theemployees with healthy and safe workconditions and should inform theemployees about the health and safetywork place rules.

Before an employee commences work,the employer gives him training inrelation to the health and safety rules.

An employer is obliged to provideemployees with free personal equipmentto protect them against factors in thework place that are hazardous andharmful to health and to instruct theemployees in the use of suchequipment. In certain situations, it is alsoobliged to provide employees with freeworking clothes and shoes and shouldnot permit the employees to workwithout personal protection equipment,work clothes and shoes.


153

An employer who employs more than100 employees is obliged to set up anadvisory and supervisory board body onwork and safety issues. If the employeremploys fewer than 100 employees, itmay assign the performance of workand safety service tasks to an employeecarrying out other work.

An employer with more than 250employees is obliged to set up a workand safety committee as an advisoryand opinion-giving body.

11. Industrial Relations11.1 Trade UnionsUnder Polish law, there is freedom oftrade union establishment. To establish atrade union there should be tenfounders. Trade unions have variousrights as far as employmentrelationships are concerned. Employersare obliged to consult with them, forexample on redundancies, transfer ofbusiness, termination of the employmentcontract of an employee represented bytrade unions. Employers cannot dismissemployees who are members of themanaging body of a trade union.

11.2 Collective AgreementsCollective agreements betweenemployers and trade unions are mostusually found in the industrial sector andoften regulate matters such as pay,working hours, holidays, disputeprocedures and redundancyprocedures.

Collective agreements are one source oflabour law. They are fully binding on anemployer party to the agreement.They regulate work conditions, rightsand obligations of the employer and theemployees. Typically, work conditionsprovided for in collective agreements aremore beneficial to the employees thanthose stipulated in employmentlegislation.

11.3 Trade DisputesTrade disputes may relate to work andremuneration conditions. The first stepto resolving a trade dispute is anegotiation exercise between the tradeunions and the employer. If the partiesdo not come to an agreement, the nextstep is mediation conducted by therepresentatives chosen by trade unions

and the employer. If the parties do notreach an agreement as a result ofmediation, trade unions have the right togo on strike. The right to strike isguaranteed by the Polish Constitution.


The Workers Information andConsultation Directive has beenimplemented by means of the Act onInforming and Consulting Employees of7 April 2006. This introduces a newemployee representative body called the“Employee Council”. The Act applies toemployers who employ more than100 employees during the initialtransition period which ends on23 March 2008 thereafter it applies toemployers who employ at least50 employees. The employer is obligedto inform the employees about their rightto establish the Works Council but is onlyobliged to create a Works Council whena request is made by the employees.

An Employee Council only has aconsultative remit. In particular, Councilsare not entitled to enter into collectivedisputes with the employer or call anystrikes.

Employers must keep the EmployeeCouncil informed about the following:

(i) the activities and economic situationof the employer and any plannedchanges in this field;

(ii) the situation, structure and probabledevelopment of employment withinthe undertaking; and any activitieswhich are aimed at maintainingemployment levels; and

(iii) those activities which may cause anymaterial change in the organisationof work or basis of employment.

The employer is also obliged to consultwith the Employee Council on thematters outlined at (ii) and (iii) above.

The Employee Council is entitled toissue an opinion on the matters that ithas been informed about. However, theEmployer is not required to take anyaction in response to this opinion.The consultation should be carried out

in good faith and with due regard to theother party’s interests. However, this isvery general wording, which does notoblige the employer to share theEmployee Council’s view or to reach anyagreement.

An employer may have additionalinformation and consultation obligationsin the context of mergers andacquisitions and redundancy exercises(see sections 12.2 and 13.1 below).


12.1 GeneralGenerally, under Polish law, when acompany sells its business or a partthereof to another entity, the employeesare transferred together with thebusiness. From the date of the transfer,the seller’s employees become theemployees of the buyer.

Employees who are transferred mayterminate their employment contracts onseven days’ notice at any time in thetwo-month period following the transfer.


If trade unions are recognised, the sellerand the buyer have to inform the tradeunions 30 days before the date of thetransfer.

If there are no recognised trade unionsthe seller and the buyer have to informthe employees about the transfer30 days prior to the date of the transfer.

This obligation exists, regardless of thenumber of employees involved, everytime the employees are transferred withthe business.

A sale and purchase agreement can besigned before the information andconsultation process is completed.However, if the consultation process hasnot been completed before the sale andpurchase agreement is signed, theremay be fines (of up to 5,000 PLN)imposed on employers for failing tocomply with the obligation. The courtscannot, however, object to the transfer.There is no specified minimum periodover which the information andconsultation must take place.



154


12.3 Notification of AuthoritiesThere is generally no obligation to supplyinformation to any governmental orregulatory bodies. There are, however,limited exceptions in relation to State-owned or municipal enterprises.Every action regarding the transfer of thebusiness of a State-owned enterprise isinitiated by the State founder or, if not,the State founder has to consent to it.

In certain situations (e.g. if the transfercould impact on market competition),the buyer must obtain the consent ofthe President of the Office forCompetition and Consumer Protection(“OCCP”) before the transfer iscompleted. A fine may be levied if atransfer is completed before suchconsent is obtained.

12.4 LiabilitiesA failure to comply with the informationand consultation obligations or arequirement to secure the consent of thePresident of the OCCP can lead to finesof up to 10 per cent of the business’turnover achieved in the preceding year.

13. Termination13.1 Individual TerminationThe notice period varies according tothe type of employment contract and onthe length of employment with a givenemployer.

The employer should inform, in writing,the trade unions representing anemployee of any intention to terminatean employment contract of indefiniteduration and it should state the reasonsfor the dismissal.

If a trade union decides that such anotice is unjustified, it may present theemployer with written substantiatedobjections within five days of receivingthe information.

The minimum guaranteed notice periodfor an employment contract with a trialperiod provision is as follows:

■ three working days if the trial perioddoes not exceed two weeks;

■ one week if the trial period is longerthan two weeks;

■ two weeks if the trial period is threemonths.

A fixed-term contract can be terminatedby the parties with two weeks’ notice ifthe term of the contract is longer thansix months.

The minimum guaranteed notice periodfor an employment contract of indefiniteduration is:

■ two weeks if the employee has beenemployed no for more than sixmonths;

■ one month if the employee has beenemployed for at least six months;

■ three months if the employee hasbeen employed for at least threeyears.

The employee receives remunerationduring the entire notice period.

13.2 NoticeThe termination notice must be in writingand must be delivered to the employee.

13.3 Reasons for DismissalThe employer may terminate anemployment contract at any time.However, he has to state the reasons forthe dismissal. Under Polish law, thereasons have to be justified. This meansthat they have to be related to theemployee’s work (e.g. low standard ofwork). If an employee proves that thereasons for dismissal are not justified, hehas the right to claim compensation, or,if the employment contract has beenterminated in the meantime, theemployee can claim reinstatement to hisprevious position. The maximum amountof compensation that can be awarded isthree months’ remuneration.

13.4 Special ProtectionThere are special rules regardingdismissal as far as pregnant women,trade union representatives oremployees nearing retirement age areconcerned. Generally, employers cannotterminate the employment contracts ofsuch protected employees. There are,however, exceptions to these protectionrules. If an employer is declaredbankrupt or is in the process of

liquidation, pregnant women andemployees reaching retirement age willnot be protected from dismissal.

13.5 Closures and Collective DismissalsThere are special rules in relation toredundancies. The rules will apply if theemployer employs at least20 employees and within the period of30 days he makes redundant:

■ 10 employees where the totalworkforce is less than 100employees;

■ 10 per cent of employees if the totalworkforce is between 100 and300 employees;

■ 30 employees if the total workforceexceeds 300 employees.

An employer is obliged to consultrecognised trade unions about anyproposed redundancies. The employerand trade union should execute anagreement regarding the terms of theredundancy exercise. An employer isalso obliged to notify the poviatemployment office of the redundancyterms (in particular of the number ofemployees who will be made redundantand the reasons for the redundancy).

Generally, in the case of redundancyemployment protection rules do notapply.

An employee who is made redundant isentitled to a redundancy payment of:

■ one month’s remuneration if he hasbeen employed for less than twoyears;

■ two months’ remuneration if he hasbeen employed for more than twoyears and less than eight years;

■ three months’ remuneration if he hasbeen employed for more than eightyears.

The total amount of a redundancypayment may not exceed 15 times theminimum wage.

If the employer subsequently recruits tothe same positions that were previouslymade redundant, it is obliged to re-hire


155

an employee made redundant from thisposition if he applies for a position withina year of the date his employmentcontract was terminated.

14. Data Protection14.1 Employment RecordsThe Personal Data Protection Act (the“Act”) regulates the processing ofpersonal date in relation to individualsonly. Under the Act, personal datameans any information relating to anatural person from which it is possibleto identify that person.

Data processed in connection withemployment in its broadest sense(e.g. administrative purposes, civil lawpurposes) comes within the scope ofthe Act.

An employer, as data administrator, ispermitted to process employee data for“justified” purposes of the employer.This covers processing for the purposesof fulfilling business objectives and thefulfilment of statutory and contractualobligations towards employees.

An employer is obliged to takeappropriate security measures toprevent unauthorised access to thepersonal data of its employees.

14.2 Employee Access to DataEmployees have the right to demandthat their personal data issupplemented, updated, rectified,temporarily or permanently withheldfrom processing or deleted, if they areincomplete, out of date, incorrect or ifthey have been collected in breach ofPersonal Data Protection Act or havebecome superfluous to realisation of thepurpose for which they were collected.

Under the Personal Data Protection Actan employee has the right to control theprocessing of his/her personal data bythe employer. In particular an employeehas the right:

■ to be informed about the manner inwhich access is given to the data,and in particular about the recipientsor categories of recipients to whomthe data is made available;

■ to demand that his/her personaldata be supplemented, updated,amended, that its processing bediscontinued temporarily orpermanently, or that the data isremoved, where the data isincomplete, out of date, inaccurateor was collated in breach of the Act,or is no longer necessary for thepurpose, for which it was originallygathered.

The Personal Data Protection Act doesnot specify the method by whichproviding an employee with informationconcerning his/her personal data. This isleft to the employer to decide providedthat the employee has an effectivemeans of acquainting himself with theinformation and the information is givenin writing if the employee so requests.

14.3 MonitoringThe monitoring of employee emails isnot automatically lawful. There is atpresent some doubt as to whether itwould be lawful if a notice is given toemployees prior to monitoring. It doeshowever seem likely that monitoring willbe lawful if an employee consented to it,prior to the monitoring taking place.Consent can be given in theemployment agreement, or providedseparately at a later date.



156

Employment and Benefits in the European UnionPortugal

Portugal1. IntroductionThe primary source of employee rights isthe Constitution which enshrines rightssuch as the employee’s right to strike.

Employment relationships in Portugal arehighly regulated, and in the past therehas been criticism that the extent ofregulation has led to a certain amount ofinflexibility in the labour market.

A new Labour Code came into force on1 December 2003. This simplified andconsolidated the pre-existing rules, aswell as implemented significant changesin the following areas:

■ the negotiation of collectiveagreements;

■ the use of term employmentcontracts;

■ termination of employmentcontracts;

■ flexible working conditions.

In August 2004, Law 35/2004, July 29,came into force complementing andregulating the Labour Code.

Collective bargaining is well establishedwith some 70 per cent of Portugueseemployees being covered by some formof collective agreement. Collectiveagreements are legally binding and, itshould be noted that, there is a highdegree of Government intervention inthe conduct of collective negotiations.

Disputes are resolved by a highlydeveloped system of Labour Courts(Tribunais de Trabalho) but the system isextremely cumbersome, and it can takeone to two years between an aggrievedindividual making an application and afinal decision being given at firstinstance and four to five years if thecase goes on appeal.


2.1 GeneralThere are three categories ofemployees: general, rural and domestic.

In this publication, attention is focusedexclusively on “general” employeescovering non-domestic and non-agricultural employees including seniorstaff and directors.

2.2 DirectorsThere are specific provisions relating to“special confidence” employmentrelationships, namely, those withdirectors, managers and their personalsecretaries.

2.3 OtherThere are specific provisions relating topart-time employment. The salary ofpart-time employees must be calculatedpro-rata to the salary of full-timeemployees carrying out similar work.

3. Hiring3.1 RecruitmentEmployers are encouraged to recruitemployees between the ages of 16 and30 who have never had regularemployment. Employers who employsuch employees are exempt frommaking 50 to 100 per cent of the socialsecurity contributions they mightotherwise have to make for a period ofthree years.

Women must be allowed access to alljobs, professions and posts. As a basicrule, job offers and advertisements mustnot specify any restrictions orqualifications based on sex.

Although there is a recommendation inthe law on contracts of employment thatemployment shall be made available toindividuals notwithstanding age, illnessor disability, undertakings are not legallyobliged to hire any minimum percentageof disabled workers. However,employers benefit from reduced socialsecurity contributions in respect ofdisabled employees.

3.2 Work PermitsA work permit is required in respect ofnon-EEA nationals of countries which donot apply a principle of equal treatmentto foreign nationals intending to work fora short period. However, such nationalsintending to work for more than twoyears, must obtain a residence permit.All contracts of employment of this typemust be registered by the employer with

the Ministry of Labour. The contract willbe considered for registration if theemployer provides evidence of thereasons for wishing to employ a foreignnational, evidence that that employeehas a clean police record and a copy ofthe signed employment contract.

Foreign employees may not be offeredpay and other benefits differing fromthose offered to Portuguese nationalsdoing equivalent work.

There are no restrictions regarding thenumber of foreign employees that aPortuguese employer is allowed to hire.However, an annual Government reportestablishes the total maximum numberof foreign employees that may beadmitted for each sector of activity.

4. DiscriminationThe Portuguese Constitution enshrinesthe basic right to be treated equallyregardless of sex, race or nationality.The Labour Code guarantees equal pay,equal opportunities, equal conditions atwork and equal treatment for both menand women and outlaws discriminationon the grounds of parentage, age, sex,sexual orientation, marital status, geneticheritage, disability, chronic illness,nationality, ethnic origin, religion, politicalor ideological convictions and tradeunions membership.


5.1 Freedom of ContractAlthough the principle of freedom ofcontract is recognised, in practice suchfreedom is limited in the employmentfield by the requirements of legislativeprovisions and collective agreements.A collective agreement will takeprecedence over an individual contractwhere the provisions of the former aremore favourable to the employee.

5.2 FormThere is no requirement for contracts ofemployment to be evidenced in writing.However, home based work contracts,term contracts (where permissible), part-time contracts, contracts with non-EEAnationals of countries who do not applya principle of equal treatment to foreignnationals (see above) and non-competition provisions must be in


157

writing. In addition, as Portugal hasimplemented the EU Directive dealingwith the information to be given aboutthe contract of employment, it isnecessary to have the “essentialaspects” of the contract, as defined inthe Directive, communicated to theemployee in writing.

Contracts may be for fixed or indefiniteperiods and, if not specified to be for afixed period, will be deemed to be for anindefinite one. Term contracts may beentered into for periods of six months tothree years, and can be renewed twiceprovided that it does not in aggregateexceed three years, except in specificcircumstances provided by law. If a termcontract “overruns”, then it will bedeemed to have become a contract foran indefinite period. Term contracts mayalso be entered into for non definedperiods of time in certain legally definedsituations (e.g. for the duration of aspecific project, as a temporaryreplacement of an absent employee).In these situations the contract’sduration is limited to the duration of the“event” giving rise to the contract.

5.3 Trial PeriodsThe maximum trial period for anindefinite contract is 90 days. Longerperiods apply for senior managementcontracts (240 days) and contractswhich require special skills or experience(180 days). During the trial period thecontract may be terminated by eitherparty without notice or compensation.

In the case of fixed-term contracts, themaximum trial period is 30 days forcontracts of six months or more and15 days for contracts of less than sixmonths.

These periods can be reduced bycollective agreement or by writtenagreement between the parties.


Employees are under a general duty toprotect confidential information and notto reveal information concerningproduction methods or other businesssecrets to third parties. Unlawfulcompetition by an employee is a reasonwhich may justify dismissal.

To be effective, non-competitionprovisions must be contained in awritten contract of employment andcover only activities which mayreasonably be said to damage theemployer’s business. They can be for amaximum period of two years and theemployee is entitled to compensation forthe period during which alternativeemployment is restricted. However, insituations where the employee’s roleinvolves a significant degree ofconfidentiality or access to sensitiveinformation, the non-compete periodmay be extended to three years.

5.5 Intellectual PropertyIf an invention is made by an employeeduring the course of his or heremployment, it belongs to the employer,provided the activity giving rise to theinvention is required by the contract andthe employee is remunerated for theinvention. If such remuneration is notprovided for, the employee is,nevertheless, entitled to be remuneratedaccording to the value of the invention.If the invention, however, is connectedwith the employer’s activity but is notrelated to a task defined in the contract,the employer has a preferential rightover the acquisition and exploitation ofthe invention; appropriate compensationmust however be paid to the employee.

6. Pay and Benefits6.1 Basic PayA statutory minimum national wage isnormally fixed each year ((c 403 for2007).

The employer cannot reduce thecontractual wage, unless expresslypermitted to do so by law, or wheresuch a reduction has been accepted ina collective agreement.

An extra one month’s basic wage mustbe paid to all employees as holidayallowance at Christmas by law.


6.2 Private PensionsIn spite of the relatively generousprovisions for state pensions, in someareas there are supplemental privatepension plans. These tend to be morecommon in the case of larger and multi-

national companies. All private pensionschemes established on or after1 January 1987 must be funded andmanaged on a segregated basis, eitherthrough an insurance company or amanagement society approved underthe law.

Most private pension schemes havebeen collectively bargained and offerbenefits related to final pay, targeting afinal pension (inclusive of the statepension) of between 80 and 100 percent of final pay.

6.3 Incentive SchemesThere is no legislative requirement foremployers to operate share option orprofit related pay schemes, and inpractice such schemes are not widelyused.

6.4 Fringe BenefitsCommon fringe benefits includesubsidised meals for employees, carsfor directors, mobile telephone andhealth insurance.

6.5 DeductionsEmployers are obliged to deduct tax andsocial security contributions at source.

7. Social Security System7.1 CoverageAlthough the majority of employees arecovered by the national insurance plan(Caixa Geral de Previdencia eSegurança Social), there are other socialsecurity plans providing benefits tovarious categories of employees.Benefits provided include retirementpensions, unemployment payments,family allowances, sickness andmaternity pay. Extensive medical care isprovided under a national health systemfunded by the social security system.

7.2 ContributionsBecause of the extensive benefitsprovided, contribution rates are high,employers’ contributions are 23.75 percent of salary and employees’contributions are 11 per cent of salary.In addition, all employees must beprovided with a minimum level ofindustrial injury benefits; employers mayprovide these benefits by way ofinsurance.



158


Depending on the duration of a termcontract, an employer’s contribution ratemay be increased by up to an additionalone per cent if at least 15 per cent of itsworkforce are engaged on termcontracts.

8. Hours of WorkThe legal limit on the maximum hours ofwork is eight hours a day (up to amaximum of 40 hours per week).However, collective agreements mayestablish different maximum hours ofwork provided that they do not exceedthe legal maximum hours of workprovided for by general law.Special flexible working hours regimesmay also be established in certaincircumstances.

The Labour Inspectorate must beinformed twice a year of the number ofhours worked in excess of the legalmaximum. Overtime must be paid at apremium of 50 per cent for the first hourand at 75 per cent of normal rates forsubsequent hours or fractions.The premium is 100 per cent if overtimeis performed on a day off.

9. Holidays and Time Off9.1 HolidaysThere are 13 national public holidaysand various local and municipalholidays. Permanent employees areentitled by law to 22 working daysholiday per annum and, unless thecontrary is agreed with an employee, theemployer is obliged to permit an annualvacation in the period between May andOctober.

The number of days of holidays isincreased according to the employee’sattendance record as follows:

■ Three days if the employee has hada maximum of one absence or twohalf days;

■ Two days if the employee has had amaximum of two absences or fourhalf days;

■ One day if the employee has had amaximum of three absences or sixhalf days.

9.2 Family Leave

Pregnant women are allowed 120 dayspaid maternity leave, 90 of which mustbe taken after birth. The duration ofmaternity leave can be increased by afurther 25 per cent, if the mother sodesires. Maternity allowance is 100 percent of the woman’s average wage for120 days or 80 per cent for 150 days(if the maternity leave is increased by25 per cent) and the cost is met bythe social security system. All rightsregarding job security and seniority areprotected during maternity leave. In theevent of multiple births the 120 days ofmaternity leave will be increased by anadditional 30 days leave for eachadditional child.

Either the mother or the father may takeunpaid leave of up to three months,extendible to up to two years, after thebirth of a child to look after that childuntil the child is six years old. Employeeshave the right to return to their previousjob on expiry of parental leave.

In the case of the birth of a third child ormore, leave may be extended for up tothree years.

Either the mother or the father will alsobe entitled to take unpaid leave of up tofour years to take care of their childrenin cases where they are handicapped orhave a chronic disease until the child istwelve years old.

9.3 IllnessDuring the first three days of absencedue to illness or injury, the employeedoes not receive his or her full wage.After this period, the employee isentitled to receive pay for up to1095 days. These costs are met by thesocial security system as follows:

– 55 per cent of full wage for periodsof illness of 30 days or less;

– 60 per cent of full wage for periodsof illness of more than 30 days andup to 90 days;

– 70 per cent of full wage for periodsof illness of more than 90 days andup to 365 days;

– 75 per cent of full wage for periodsof illness of more than 365 days.

The employment contract will beconsidered suspended if an employee isunable to work for longer than 30 days.

Sickness and disability payments aremade under the social security system,although in some industries, collectiveagreements may provide for asupplemental payment. Employers areliable for the payment of salary if theemployee is not covered by the socialsecurity system.

10. Health and Safety10.1 AccidentsAll employees must be covered for aminimum level of industrial injury benefitin addition to benefits payable under thesocial security system. This is mostcommonly provided by way of insurance(with premiums in the range of threequarters of one per cent to three percent of payroll depending on the natureof the work), but can be covered byemployers on a case by case basis.

10.2 Health and Safety ConsultationThe law gives employees the right tohave health and safety representativesand health and safety committees mayhave to be set up under the terms ofcollective agreements. Special rulesgovern the running of employers’ healthand safety departments. Employees andWorks Councils have rights toinformation and consultation in respectof health and safety matters.

11. Industrial Relations11.1 Trade UnionsTrade unions are given extensive rightsunder the law to organise themselveswhich, together with the relatively fewlegal restrictions on the formation oftrade unions in Portugal, has led to alarge number of trade unions. However,it is difficult to accurately assess thepercentage of the Portuguese workforceinvolved in unions, but estimatessuggest that it is about 24 per cent.

Although unions are protected frompolitical interference by law, they arethemselves highly political.The Portuguese Communist Party isextremely influential, particularly in theblue collar unions, although the Socialistand the Social Democrats have recentlyincreased their influence. The majority of


159

Portuguese unions belong to one of twonational organisations:

■ the CGTP - Intersindical(Confederação Geral dosTrabalhadores Portugueses); or

■ the UGT (União Geral dosTrabalhadores).

There are regional or sectoral employers’associations, for example, theConfederation of Portuguese Industries(CIP), which negotiate collectiveagreements.

11.2 Collective AgreementsThere are three different types ofcollective agreements recognised underPortuguese law:

■ contrato colectivo, which is thecollective contract negotiatedbetween employers’ associationsand unions;

■ acordo colectivo, an agreementnegotiated between unions andmore than one employer (althoughnot an employers’ association); and

■ acordo de empresa, an agreementbetween unions and an individualemployer.

The first two are more commonly foundin small and medium businesses, whilstlarge employers tend to negotiate anacordo de empresa.

Collective agreements are governed bya special section of the New LabourCode and most private sectoremployees are covered by one of theseagreements.

Provided that a collective agreementdoes not attempt to impose uponemployees worse economic and socialconditions than those provided by law orattempt to regulate the economicactivities of the undertaking, the partiesare free to include any matters whichthey feel are appropriate. In practice,collective agreements tend to covermatters such as working hours, careerdevelopment, health and safety andminimum wages.

The procedure by which collectiveagreements are negotiated is governedin some detail by law, and the final formof any agreement must be lodged withthe Ministry of Labour.

The Labour Code contains provisions onthe duration and renewal of collectiveagreements. Generally speaking, underthis regime a collective agreement maynot remain in force for longer than twoyears without being renegotiated.The underlying purpose of theseprovisions is to promote the periodicalrenegotiation of the collective agreements(which, in the past, had remainedunaltered for long periods of time).

The Government has powers tointervene in the collective bargainingprocess, and may by order (regulamentode extensão) extend a collectiveagreement to bind parties other than theoriginal signatories.

11.3 Trade DisputesThe right to strike is enshrined in thePortuguese Constitution.The procedures laid down in theLabour Code must be followed.

It is also worth noting that lock-outaction by an employer is a criminaloffence punishable by up to two years’imprisonment.


There is a constitutionally guaranteedright to form a Works Council (the sizeof which will depend on the number ofemployees) in any undertaking whateverits size. Its members are elected on anannual or twice yearly basis by theworkforce frequently, although notalways, from lists put forward by thedominant union. The role of a WorksCouncil is advisory, aiming to safeguardemployees’ interests by becominginvolved in consultation on matters suchas changes in location, plant closureand production changes.

In addition to Works Council delegates,time off must be given to elected uniondelegates, whose role is to ensure thatcollective agreements are adhered toand to defend employees’ rights.


12.1 GeneralThe Labour Code implements therevised Acquired Rights Directive thatregulates employees’ acquired rights inthe event of a transfer of a business.As a general rule, a transferee will takeover the contracts of employment onthe transfer of a business and assumethe position of the transferor, unless theemployee was transferred elsewhere(e.g. to a different location ordepartment) before the transfer of thebusiness occurred.


Before the transfer takes place, thetransferor and transferee must providewritten information to the employees, ortheir representatives, stating the dateand reasons of the transfer, its legal,economic and social consequences aswell as any specific employmentmeasures to be implemented as a resultof the transfer. This obligation arisesregardless of the number of employeesinvolved.

Ten days after compliance with theinformation obligation, the transferor andtransferee must consult the employees,or their representatives, in order toobtain their agreement on specificmeasures to be implemented as a resultof the transfer.

12.3 LiabilitiesFailure to comply with the informationand consultation obligations is classifiedas a light labour law infractionpunishable with fines, however suchfailure will not invalidate a transaction.

For a period of one year after thetransfer, the transferee is jointly liablewith the transferor for any obligationsvis-à-vis the employees that arose priorto the date of the transfer.

To reduce its joint liability, the transfereemay display a notice at the workplacestating that the employees must claimany outstanding sums owed to themwithin a three month period of thetransfer otherwise the transferee willcease to be liable for such sums.



160


Any dismissals or redundancies prior toor after the transfer that are made inconnection with the transfer itself areunlawful. Failure to comply with theobligation in relation to the automatictransfer of employees is classified as avery serious labour law infraction. This ispunishable with fines and will entitle theemployees to bring proceedings to bereinstated or to receive compensationfor unlawful dismissal.

13. Termination13.1 Individual TerminationFixed-term contracts may terminate withthe expiry of the term if notice is given inwriting by the employer or by theemployee, respectively, fifteen or eightdays before the end of the term. Anycontract may terminate by mutualagreement (which must be recorded inwriting) or by the employee’s unilateraldecision. Otherwise (except during a trialperiod or when there are collectivedismissals), an individual’s contract ofemployment may only be terminated ifthere is gross misconduct (justa causa),e.g. if the individual is no longer suitablefor the job, or if the job itself haseffectively disappeared for technologicalor economic reasons. In particular, itshould be noted that although theretirement age is legally fixed at age 65,the employee may not be forced toretire and, any enforced retirement willbe construed as an unjust dismissal.However, once an employee reaches70, the employment contract will bedeemed to become a fixed-termcontract for six months, terminable atthe end of this period.

Where an employer terminates anemployment contract in breach of theapplicable rules a labour court canclassify it as an illegal dismissal. This willentitle the employee to choose betweenbeing reinstated or receivingcompensation of between 15 and45 days of base salary per year of seniority(in any event the compensation cannotbe less than three months of salary). Theemployee will also be entitled to allunpaid salary from the date of dismissaluntil the date of the court decision.

13.2 NoticeAn employee may terminate anemployment contract on 30 or 60 days’

notice depending on the duration of theemployment contract.

An employer cannot terminate anindefinite employment contract by givingnotice except in cases of redundancybut in that case there are other complexprocedural requirements.

13.3 Reasons for DismissalThere are three reasons for which anindividual’s contract may be terminated:

■ misconduct;

■ redundancy; or

■ the employee’s lack of adaptability tonew working conditions.

In connection with dismissals formisconduct, the law lays down a non-exhaustive list of reasons each of whichwould be sufficient justification.

Termination due to elimination of anindividual’s post (which is equivalent toindividual redundancy) must bedistinguished from collective redundancy(see below).

Finally, an employer may terminate thecontract of employment if an employeeis unable to adapt to changingcircumstances. There are certain specificcircumstances which must exist beforedismissal on such grounds can occur(including the introduction of newtechnology in the preceeding sixmonths).

13.4 Procedure for DismissalThe procedure applicable to dismissalsarising for each of the reasons set outabove is laid down in considerable detailby law. In connection with dismissals formisconduct, the Works Council must beinformed and the employer must awaitthe opinion of the Works Council beforeimplementing the dismissal (failure to doso will lead to the dismissal beingconsidered void). Where dismissal is dueto the disappearance of the job, or theemployee’s lack of adaptability, theemployer must notify the Works Councilwhich may call upon the LabourInspectorate to examine the grounds ofthe dismissal. There are detailedconsultation requirements.

13.5 Special ProtectionTrade union members, union delegatesand Works Council members are offeredenhanced protection against dismissal.Dismissal of these types of employees isalways presumed to have been madewithout just cause. In these situations, ifthe employer is unable to demonstratethat there is just cause for a dismissal,the employee can choose either to bereinstated or to receive a payment equalto twice the value of the compensationthat an employee in an equivalentposition would be entitled to by law,contract or collective agreement.

Prior to dismissing an employee who ispregnant or breast-feeding, a priorfavourable opinion must be issued bythe Employment Department. Dismissalof pregnant or breast-feeding employeesis always presumed to have beenwithout just cause.

13.6 Closures and Collective DismissalsThere will be a collective dismissal if twoor more employees are dismissed from amicro company (i.e. a company with amaximum of ten employees) or a smallcompany (i.e. a company with 10 to50 employees), or if five or moreemployees are dismissed from a mediumor larger undertaking. The employermust demonstrate that the reasons formaking collective dismissals aresufficiently grave to justify priority beinggiven to the undertaking’s interests overthe constitutionally protected rights ofthe employees. The employer must notifythe Works Council and the LabourInspectorate, giving details of eachemployee involved and the reasons forthe proposes dismissals. The employerand unions are obliged to negotiate waysof minimising the numbers of affectedemployees. The services of the Ministryof Labour will intervene in negotiations toensure that the appropriate formalitiesare complied with and to act asmediator. Once the negotiations arecompleted, the employer must give allaffected employees at least 60 days’notice before the dismissals can takeeffect, and inform them, in writing, of thereason for the dismissal, the date onwhich it takes effect and the amount ofthe compensation payable.The employer must pay compensation ofone month’s salary for each year of


161

service subject to a minimum of threemonths’ pay.

14. Data Protection14.1 Employment RecordsThe collection, storage and use ofpersonal data held by employers abouttheir employees are regulated by thePersonal Data Protection Law, approvedby Decree-Law 67/98, dated October26 (PDPL), which implements the EUData Protection Directive. Violation ofthe PDPL can lead to criminalconvictions, fines, compensation claimsfrom affected employees or regulatoryaction. The Labour Code alsoestablishes specific data protection rulesbased on the principle of preservation ofthe right to privacy/private life.

Employers, as data controllers, areunder an obligation to ensure that theyprocess personal data about theiremployees (whether held on manual filesor on computer) in accordance withspecified principals including thefollowing: ensuring that data is accurate,up to date, and is not kept longer thanis necessary and that it is storedsecurely to avoid unlawful access oraccidental destruction or damage.

Employers, and all persons that haveaccess to personal data in the scope oftheir job function are obliged to keepsuch data confidential.

In the absence of the application of anyof the exemptions specified by the DataProtection National Commission (CNPD)employers must notify the CNPD of theirprocessing of their employees’ personaldata. This notification is made on astandard form setting out details of theprocessing, the data controller’s identity,the purposes of the processing, thecategories of data to be processed,security measures adopted to protectthe data, details relating to the transfersof data to third parties and internationaldata flows.

In some specific cases identified by thePDPL (including cases where sensitivedata and criminal records areprocessed), an employer must obtainthe prior authorisation of the CNPD inorder to initiate the processing of theiremployees’ personal data.

In addition, in the absence of a relevantexception, personal data may only beprocessed if employees haveunambiguously given their consent.In some cases express consent isrequired, for example in order to processsensitive data where no relevantexceptions apply.

14.2 Employee Access to DataEmployees, as data subjects, have theright to access their personal data. Theright of access entitles them, subject tocertain limited exceptions, to be told,among others, what data are held aboutthem, the purposes of the processing,to whom it is disclosed and to beprovided with a copy of their personaldata. Data subjects may also requestthe rectification, deletion or blocking oftheir personal data, where theprocessing of their data does notcomply with the provisions of the PDPL,and that any such rectification, deletionor blocking should be notified to anythird party to whom their personal datahad been communicated except wherethe employer demonstrates that it isimpossible to do so. The exercise ofthese rights of access is subject tocertain conditions in particular case ofdata processing, as provided by thePDPL.

Employees also have the right to objectto the processing of their data in thecircumstances specified by the PDPL,namely in the case of processing fordirect marketing purposes or for anyother form of advertising.

14.3 MonitoringThe monitoring of employee e-mail,Internet and telephone usage andclosed circuit TV monitoring is regulatedby the Labour Code. Monitoring ispermissible provided that it is carried outin accordance with the principles andprocessing conditions prescribed by theLabour Code. All files and systems usedby the employer to process employees’data must satisfy the PDPL’s provisions.Express employee consent tomonitoring is not usually required,however, employees shall be madeaware that monitoring is being carriedout, the purpose for which it is beingconducted and to whom the data will besupplied.

The recording of communications isexpressly prohibited, except if made forthe exclusive purpose of proving acommercial transaction or if made in thecontext of a contractual relationship, asestablished by the Law related toPersonal Data Processing and PrivacyProtection in ElectronicCommunications. In the case of legallyauthorized recordings, employeesinvolved in such communications mustbe made aware of the recording andthey must give their express consent tothe recording in addition to any otherdata subject involved in thecommunication. The CNPD must grantprior authorization for the recordings.

The employer is entitled to establishrules for the use of the company’scommunication systems (e.g. email).These rules must be made clear to theemployees.


An employer who wishes to provideemployee data to third parties must doso in accordance with the PDPLprinciples and processing conditions.In many cases it may be necessary toobtain express consent to suchdisclosure in the absence of a legitimatebusiness purpose for the disclosure anddepending on the nature of theinformation in question and the locationof the third party. Personal data can betransferred within the EU subject togeneral compliance with the PDPL.

Where the third party is based outsidethe EEA it should be noted that thePDPL prohibits the transfer of data to acountry outside the EEA, unless thatcountry ensures an adequate level ofprotection for personal data or one of aseries of limited exceptions apply.



162

Employment and Benefits in the European UnionRomania

Romania1. IntroductionRomanian employment relationships aregoverned principally by the Labour Code(Codul Muncii), collective bargainingagreements and the employer’s internalregulations.

The Labour Code, is the mainenactment governing employmentrelations. It came into force in 2003 andsets out the minimum rights to beafforded to employees, as well ascollective rights at work. In its attempt tocomply with European Union legislation,the Labour Code introduced many newprinciples and concepts of labour lawand the related secondary legislationhas not been entirely modified in linewith these legislative changes. Similarlya certain degree of uncertainty and lackof clarity exist in the practice and theapproach of different Romanianauthorities dealing with labour issues.

Collective bargaining agreements existat national level, industry level andcompany level. Collective bargainingagreements, irrespective of the level atwhich they have been concluded, mustnot breach the requirements of theLabour Code. Moreover, collectivebargaining agreements must notestablish rights for employees that areinferior to those established by theLabour Code.

According to the same principlecollective bargaining agreements mustnot establish rights for employees thatare inferior to those established by anycollective bargaining agreementsconcluded at a higher level and mustnot breach the minimum requirements ofthe Labour Code.


2.1 GeneralRomanian legislation makes a distinctionbetween employees engaged for anindefinite period, employees engaged fora fixed period, full-time employees andpart-time employees, temporaryemployees supplied by an agent andhome employees. However, each ofthese categories of employees have a

legal right to be treated no lessfavourably than a comparable full-timeemployee engaged for an unlimitedduration.

2.2 DirectorsUnder Romanian corporate legislation,joint stock companies’ directors andmanagers cannot be employees of thesame company for the duration of theirmandates. If employees are designatedas directors of the company theiremployment contracts with thecompany are suspended.

2.3 OtherPublic officers are subject to a speciallaw establishing their status, rights andobligations, in accordance with therelevant EU legislation.

3. Hiring3.1 RecruitmentThere are a number of sources ofrecruitment, such as the state agenciesfor employment and private recruitmentagencies. Also, in order to recruit,employers usually advertise in local ornational newspapers or journals.The services of private recruitmentagencies are often used by employersfor all categories of employees.

Romanian legislation provides forincentives to be granted by the state toemployers which hire unemployed andnewly graduated persons.

3.2 Work PermitsWork permits are required for foreigncitizens to work in Romania. There aremany types of work permits. The mostimportant is the type A work permitwhich allows a foreign person to enterinto a Romanian employment agreementand grants the foreign person the samerights as a Romanian employee wouldhave. Type B work permits are issued toseconded foreign employees for amaximum duration of one year.

EU nationals should as a matter ofprinciple be allowed to work without awork permit. However, for a transitoryperiod of up to seven years afterRomania’s accession to the EU(i.e. 2007-2014), EU nationals aresubject to the requirement of obtaininga work permit to the extent that the

respective EU member state of originhas also imposed a similar requirementon Romanian nationals. According togovernmental sources, as at February2007, the nationals of the followingcountries have free access toemployment in Romania: Bulgaria,Czech Republic, Cyprus, Estonia,Finland, Lithuania, Poland, Slovakia,Slovenia, and Sweden; whereasnationals from: Belgium, Denmark,Germany, Ireland, Greece, Spain,France, Italia, Luxemburg, Hungary,Malta, Holland, Austria, Portugal, theUnited Kingdom and Northern Ireland,Norway, Ireland and Liechtenstein arerequired to obtain a work permit.

The family of a work permit holder mayenter Romania provided they areresidents who do not need a visa or thatthey have obtained a visa for familyreunion.

4. DiscriminationThe Labour Code recognises theprinciple of equality in work relationshipsbetween all employees and allemployers. In this respect, the LabourCode prohibits any form of direct orindirect discrimination against employeeson grounds such as gender, sexualorientation, genetic parameters, age,nationality, race, colour, ethnic origin,political views, social origin, disability,marital status, family responsibility, unionmembership or union activities.The Labour Code requires employers toaddress discrimination issues in theirinternal regulations and breach of anemployer’s discrimination rules will triggerthe liability of the employer.

Specific rules on discrimination are alsocontained in special enactments, suchas the Governmental Ordinance no.137/2000 on preventing and sanctioningall forms of discrimination whichtransposes Council Directive2000/43/CE implementing the principleof equal treatment between personsirrespective of racial or ethnic origin andCouncil Directive 2000/78/CE, whichestablishes a general framework forequal treatment in employment andoccupation. Also, Law No. 202/2002regulates the principle of equalopportunity between women and menand imposes specific obligations on


163

employers in order to ensure this isachieved. This legislation provides thatemployees claiming discrimination atwork on grounds of gender maycommence civil claims againstemployers in special employment courts.Both pieces of legislation provide for theprinciple of equal pay for equal work.

Sexual harassment is a criminal offenceunder Romanian law and may besanctioned with a term of imprisonmentof a maximum period of one year.


5.1 Freedom of ContractAs a general principle, employers andemployees are free to negotiate andenter into an employment contract.Nevertheless, certain mandatoryprovisions need to be taken intoconsideration when entering into anemployment agreement. For instance,although contracts may be for a fixed orindefinite period, fixed-term contractsmay only be used in very limitedsituations as provided by law. No morethan three successive fixed-termcontracts may be concluded for thesame job, and their total duration maynot exceed 24 months.

Before entering into any kind ofemployment agreement, the employer islegally required to inform the employeeabout the most important clauses.

Irrespective of the term of the contract,the employees receive the benefit of thesame mandatory rights as provided bylaw and the applicable collectivebargaining agreements.

5.2 FormThe employment contract must beconcluded in the Romanian language inthe standard written form prescribed bylaw. After signing, the employmentcontract is registered with the territorialcompetent labour inspectorate by theemployer.

5.3 Trial PeriodsTrial periods may be included in theemployment contract. During suchperiods, either of the parties mayterminate the employment contractwithout prior notice.

The following maximum terms areprescribed for the trial period foremployment contracts concluded for anindefinite term:

(a) 90 calendar days for managementpositions;

(b) 30 calendar days for executionpositions;

(c) five business days for unqualifiedworkers;

(d) six months for graduates who areemployed first time; and

(e) 30 calendar days for persons withdisabilities.

For employment contracts concluded fora fixed term, the trial periods varybetween five business days foremployment contracts concluded forless than three months to 45 businessdays for employment contractsconcluded for more than six months andfor a management position.


The employment contract may contain aconfidentiality clause whereby theparties agree that throughout theduration of the employment contractand after its termination they will nottransmit data or information they haveacquired during the contract. Failure byeither of the parties to comply with sucha clause obliges the party at fault to paydamages.

A non-competition clause may also beincluded in the employment contract.This clause may be effective only aftertermination of the employment contractand for a period not exceeding twoyears. Under the non-competitionclause, the employee undertakes not toperform, for his or her own interests orthat of a third party, any activity whichcompetes with the activity performed forhis or her former employer, in exchangefor a monthly non-competition bonuswhich the former employer undertakesto pay during the entire non-competitionperiod. The non-competition clausetakes effect only if it clearly stipulates theactivities the employee is prohibited from

performing, the amount of the monthlynon-competition bonus, the time periodfor which the non-competition clause iseffective, the third parties on behalf ofwhom the performance of activity isbeing prohibited, and the geographicalarea in which the employee might be inactual competition with his or her formeremployer.

The monthly non-competition bonus isnot part of the employee’s salary,because it is to be paid after terminationof the employment contract. It mustrepresent at least 50 per cent of theemployee’s average gross salary paid forthe six months prior to the date ofcontract termination.

The non-competition clause may nothave the effect of the employee beingabsolutely prohibited from exercising hisor her profession or specialisation.

If the employee wilfully violates the non-competition clause, he or she may beobliged to return the bonus and, ifapplicable, to pay damagescorresponding to the prejudice causedto the employer.

5.5 Intellectual PropertyAs a general principle, copyright andinventions created by an employee inthe course of his or her employmentbelong to the employee, unlessotherwise agreed with the employer andupon payment of due compensation.However, there is an exception forcomputer programmes created byemployees during their employment,which belong to the employer.

6. Pay and Benefits6.1 Basic PayA national minimum salary is establishedannually by Government Decision. In2007 it amounts to RON 390 per month(approximately EUR 110) for170 working hours per month(the hourly rate being RON 2.294).

The National Collective BargainingAgreement for the years 2007-2010(the “National CBA”) also establishes anational minimum salary of RON 440(approx. EUR 130). The official positionof the Labour Ministry is that theminimum salary established by



164


Government Decision is applicable topublic sector employees and thatestablished by National CBA applies tothe employees in the private sector.

Index Linking is established periodicallyby Government Decision and is relatedto the inflation rate. Index Linking iscompulsory only for public institutions.However, there is no provisionprohibiting index linking in collectiveagreements or employment contracts inthe private sector.

Salaries in Romania are often linked to acertain currency exchange ratio, mostfrequently EUR or USD.

The growth of the national minimumsalary does not trigger a correspondingindexation of salaries.

6.2 Private PensionsThe Private Pensions System inRomania is governed by Law No.411/2004 that came into force on 1 July2006. According to official predictions ofthe Labour Ministry, the Private PensionsSystem should become operational by1 January 2008.

6.3 Incentive SchemesThere is no legislative requirement foremployers to grant share options orprofit related pay schemes and theseare not commonly used by employers.The granting of these incentives may benegotiated by the parties in the relevantcollective bargain agreements.

6.4 Fringe BenefitsA very common fringe benefit inRomania is meal tickets. These aretickets that can only be exchanged forfood products and employees from boththe public and the private sector mayreceive them, according to theirindividual or collective bargainingagreement. The value of the meal ticketsis deductible from the employers’taxable incomes and from theemployees’ income tax.

Private medical insurance, the use of theemployers’ vehicles or telephones forpersonal purposes are also commonfringe benefits. They may be contractualor given ex-gratia by the employers.

6.5 DeductionsDeductions from pay by the employerare prohibited, except where suchdeductions are established by means ofa definitive and irrevocable courtdecision. In addition, the deductionscannot, in any circumstances, exceed50 per cent of the net salary.

7. Social Security7.1 CoverageRomanian law establishes a mandatorybasic social security system provided bythe state. The state system of benefitscovers retirement as a result of age,early retirement, disability and survivors’pensions. In addition, the public systemprovides for benefits for temporaryincapacity to work due to sickness,maternity benefits and child careallowances. These schemes are fundedby contributions from both employeesand employers. In addition to the publicscheme, there is also a regulated privatecomplementary pension scheme which,although in force, has not yet beenimplemented and is not currentlyfunctional.

7.2 ContributionsEmployers must calculate and pay on amonthly basis to the social insurancebudget both the employer’scontributions and individual employees’contributions.

The rates of social security contributionsare established by the law on a yearlybasis, depending on work conditions, inthe social insurance budget, and aredistributed between the employee andthe employer.

The employer must deduct a total of17 per cent. from the gross monthlysalary of each employee, representingan individual employee’s contributionsfor unemployment, pensions and healthfunds.

Employers’ contributions are 28.6 percent. of gross monthly salary but maybe higher depending on workingconditions (i.e. normal or hard anddangerous conditions) and the businessobjective of the employer.

8. Hours of WorkThe legal working time for full-time

employees is eight hours per day,40 hours per week and cannot exceed48 hours per week (including overtime).However, working time may exceed48 hours per week on the condition thataverage working hours calculated for areference period of three months doesnot exceed 48 hours per week. Inaddition, reference periods betweenthree and twelve months can benegotiated in collective bargainingagreements concluded at branch level,for certain industries.

Each 12 hours worked must be followedby 24 consecutive hours of rest.

The working time for part-timeemployees, calculated weekly or as amonthly average, is shorter than theworking program of comparable full-timeemployees.

Overtime may not be performed withoutthe employee’s consent, except in caseof force majeure or absolute necessity.

In general, overtime entitles theemployee to be granted time off in lieuequal to the additional working hours, tobe taken within the following 30 days.If time off in lieu is not granted, theemployee must be paid a bonus of100 per cent.

9. Holidays and Time Off9.1 HolidaysFull-time employees are entitled to aminimum of 21 business days of holidayper year. In addition, there are eightpublic holidays in Romania. It is notpermitted to pay in lieu of untakenholiday entitlement except ontermination of employment. Also,untaken holiday entitlement may not betaken in the following year except insome very limited circumstances.Collective bargaining agreements orindividual agreements may grantadditional holiday rights.

9.2 Family LeaveWomen are entitled to maternity leave of126 calendar days. Normally, leave of63 days before the child’s birth and63 days after the child’s birth is granted.In any case, the new mother may notreturn to work earlier than 42 days afterthe child’s birth. During maternity leave,


165

the employee is entitled to 85 per cent.of her salary which is paid out of thesocial security fund. Employers arerequired to top this up to full normal payfor a period of six weeks but in practice,collective bargaining agreements or thepractice of the employers requireemployers to top this up for the entireduration of the maternity leave.

Both male and female employees areentitled to additional paid holiday forspecial family events, such as five daysfor the birth of a child (or 10 days if theemployee has attended childcareclasses), five days for the marriage ofthe employee and two days for themarriage of a child.

Employees are entitled to childcare leaveuntil the child is two years old (or threeyears old in the case of a disabled child).During this leave, employees do notreceive full pay but are entitled to socialbenefits amounting to a monthlystatutory pay of approximately EUR 180.During childcare leave, the employermay not terminate the individual labouragreement of the employee.

9.3 IllnessIllness has the effect of suspending thelabour agreement. Employees absentfrom work by reason of illness areentitled to 75 per cent of their averagesalary, which is paid by the employerduring the first five days and by SocialSecurity for the rest of the period, up toa total of 183 days per year.

10. Health and Safety10.1 AccidentsUnder Romanian law, employers areobliged to ensure the health and safety oftheir employees and to maintaininsurance against liability for accidents ofemployees at work. They are alsorequired to maintain insurance forprofessional disease. The cost of theinsurance varies according to genericclasses of risk which are established bylaw based on specific formulae for eacharea of activity. Romanian legislation alsocontains specific regulations and normsgoverning certain types of workplace andactivities in terms of health and safety.

10.2 Health and Safety ConsultationEmployers have the legal obligation to

consult with their employees on healthand safety matters and the employees,through their representatives, have theright to make suggestions on suchmatters. For this purpose, a health andsafety committee must be establishedfor companies with more than50 employees. Also, for employeesworking under difficult, harmful ordangerous conditions, the labourinspector may require such committeesto be established even for companieswith fewer than 50 employees. Forcompanies not required by law toestablish a health and safety committee,consultation with employers on healthand safety matters is carried out by arepresentative of the employeesnominated by the employer.

11. Industrial Relations11.1 Trade UnionsEmployees have the freedom ofassociation according to law. A unionmay be set up by at least 15 membersworking in the same field or professionfor one or more employers.An employee may be a member ofone union only.

The union members must paysubscriptions. They have the right toelect the union’s representatives and toorganise their activity. Unions function inaccordance with statutes that have beenadopted by their members.

In companies with more than20 employees in which no employee is aunion member, the employees may electand empower representatives topromote and defend their interests.Such representatives must be elected ata general meeting of employees, by atleast half of the total number of existingemployees. The employer and theemployees must agree on the number ofemployees’ representatives to beelected, which varies according to thetotal number of employees. The term ofoffice of such representatives may notexceed two years.

According to the Labour Code,employees’ representatives may not acton matters that are reserved by law forunions. However, they have certainrights which can be exercised by themas well as by unions. Such rights include

the right to consult on all matters thatmay affect the employment relationship,and the collective negotiation right.

Employees’ representatives mayparticipate in collective negotiations andas the case may be, enter into acollective bargaining agreement at thelevel of the company for which theywork.

However, unions may participate incollective negotiations and enter into acollective bargaining agreement at thelevel of the company where they arepresent only if they are representedwithin that company. According to theCollective Agreement Law, a legallyestablished union qualifies asrepresented at a company level if atleast one third of the total number ofemployees of the relevant company aremembers, or if it is affiliated to arepresentative unions’ organisation.

Union representatives benefit fromspecial rights including the right: (i) to beinvited by the Board of Directors toparticipate at its meetings as observers,i.e. they have the right to attend andvoice their opinion, but not the right tovote; (ii) to up to five days off per monthfor union related activities, without areduction in the salary that they wouldnormally be entitled to receive; (iii) ofunion representatives elected to theunion’s management bodies not to bedismissed for the duration of their termsand for a two year period thereafter, forreasons relating to the carrying out theirobligations as an officer of the union.

Employees’ representatives also benefitfrom special rights such as the right:(i) for the duration of their term not bedismissed for reasons not pertaining tothem, for being professionally unfit, orfor reasons relating to the carrying out oftheir duties; (ii) to 20 hours off workeach month, in order to carry out theirduties, without a reduction in the salaryrights that they would normally beentitled to receive.

11.2 Collective AgreementsCollective agreements may benegotiated at national level, at industrylevel, at group of companies level(generally in the same industry) and/or at



166


individual company level. Under the law,these agreements apply automatically toall of the employees from the relevantindustry, group of companies orcompany, irrespective of whether theemployee is a member of the unionwhich took part in the collectivenegotiations. In other words, the relevantcollective agreement sets the minimumrights to be granted to every employeewithin the relevant industry, group ofcompanies or company.

The National CBA is applicable by law toall employees working in the privatesector.

Each employer with more than 20employees must initiate collectivenegotiations every year. If the employerfails to observe this obligation, and ifthere is a union or employees’representatives within the company, theymay request the employer to startcollective negotiations. The collectivenegotiations must cover at least thefollowing subjects: (i) salaries; (ii) workinghours; (iii) work programme; and(iv) working conditions.

Collective negotiations may notnecessarily culminate in the conclusionof a collective agreement.

11.3 Trade DisputesAccording to Romanian law, labourconflicts may arise (i) with respect torights provided by employmentcontracts, bargaining agreements or thelaw (conflicts of rights); or (ii) in relationto the negotiation of rights (conflicts ofinterests).

Strikes may be organised only in thecase of conflicts of interests and onlyafter prior settlement procedures havebeen exhausted. During strikes,employment contracts may not beterminated by the employer; however,employment contracts are suspendedand employees do not receive theirsalaries for the period of the strike.


Under the National CBA, employeesmay be granted premiums of at least1.5 per cent of the monthly salary fund,participation in the profit of up to 10 per

cent, meal tickets, as well as any otherbenefits as negotiated with theemployer.

Under the law, employers haveinformation and consultation obligationswith the union or the employees’representative in certain circumstances,such as:

(a) in the event of any reorganisation ofactivity resulting in collectiveredundancies;

(b) in the event of the transfer of theundertaking, the business or parts ofthe undertaking or business;

(c) on the introduction of internalregulations of the employer;

(d) on the introduction of health andsafety rules and procedures withinthe employer;

(e) on the introduction of a professionaltraining plan within the company;

(f) on scheduling the annual leave ofemployees; and

(g) on any matters that mightsubstantially affect the workingconditions, the contractual relations,labour relations and generally theemployees’ rights and interests.

The European Works Council Lawimplemented in Romania the EuropeanWorks Council Directive 94/45/EC onthe establishment of a European WorksCouncil Law came into force on1 January 2007, i.e. the date ofRomania’s accession to the EuropeanUnion, and applies to the following:

(a) a Community-scale undertakingwhose central management islocated in Romania or in anotherMember State of the EuropeanUnion or of the European EconomicArea (“Member State”);

(b) a Community-scale undertakingwhose central management is notlocated in a Member State, butwhere the central management hasappointed a representative inRomania for the purpose of initiatingthe establishment of a European

Works Council or a procedure forinforming and consulting withemployees; and

(c) a Community-scale undertakingwhose central management is notlocated in a Member State, and itdid not appoint a representative in aMember State, and the subsidiary,branch or any other secondary officeof such undertaking or, as the casemay be, the undertaking member ofa group, which employs the largestnumber of employees in a MemberState is located in Romania.

A Community–scale undertaking musthave at least 1,000 employees withinthe Member States and at least 150employees in each of at least twoMember States in order to be subject tothe legal obligation to establish aEuropean Works Council or a procedurefor informing and consulting withemployees.


12.1 GeneralEmployees are protected in the case oftransfers of undertakings, businesses orparts of undertakings or businesses, asLaw no. 67/2006 has implemented theAcquired Rights Directive 2001/23/EC.In such circumstances, employees retainall their rights as provided in theiremployment contracts and bargainingagreements at the date of the transfer.Employment contracts may not beterminated by the employer.


Thirty days before the transfer isscheduled to take place both transferorand transferee must inform theirrespective employees in writing of thefollowing:

(a) the date of the transfer;

(b) the grounds for the transfer;

(c) the legal, economical and socialconsequences of the transfer;

(d) the measures to be taken in relationto the employees; and

(e) the working conditions.


167

Also, both the transferor and thetransferee must consult with theirrespective employees 30 days beforethe transfer is scheduled to take place ifcertain measures are planned, in orderto reach an agreement with theemployees.

In addition, employers have a generalobligation to inform and consult withemployees on every occasion on whichdecisions are made which have asignificant impact on working conditions,contractual relations with employees orlabour relations.

12.3 Notification of AuthoritiesThere is no obligation to notifyauthorities in the case of a transfer ofundertaking. This obligation exists onlywhen collective redundancies areinvolved.

12.4 LiabilitiesFailure to observe the information andconsultation obligations by the transferoror the transferee in the case of a transferof an undertaking is deemed a minoroffence and is sanctioned with a fine ofbetween RON 1,500 and 3,000(approximately EUR 450 and 900).Moreover, employees affected by thetransfer may make a complaint to acourt.

If it is not within a transfer of undertakingsituation, the failure to inform andconsult with employees about majordecisions affecting their interests andrights is deemed a minor offence and issanctioned with a fine of between RON1,000 and 20,000 (approximatelyEUR 300 and 6,000).

13. Termination13.1 Individual TerminationThe individual labour contract maycease pursuant to the parties’ mutualconsent or at one party’s initiative, underthe terms and conditions expresslyprovided by the law.

The labour contract may also ceaseautomatically in cases expresslyprovided by the law.

13.2 NoticeThe National CBA gives employees theright to receive a termination notice,

which must be sent no less than20 working days prior to dismissal,if termination occurs in one of thefollowing circumstances:

■ based on a decision by thecompetent medical examinationauthorities that the employee issuffering from physical and/or mentalincapacity which prevents him or herfrom accomplishing his or hercurrent workplace duties, or

■ the employee is not professionally fitfor his or her current position, or

■ in the case of dismissal for reasonsnot pertaining to the employee.

If, during the notice period, theemployment contract is suspended, thenotice term is also suspended.

The Labour Code provides for specificprocedures to be observed byemployers in the case of dismissal inspecific circumstances.

In the case of resignation, thetermination notice may not exceed15 calendar days for employees inexecutive positions, or 30 calendar daysfor employees in management positions.Throughout the notice period, theindividual labour agreement shallcontinue to take full effect and if, duringthe notice period, the employmentcontract is suspended, the notice termshall be suspended accordingly.

An employee may resign without noticeif his or her employer has not met his orher obligations under the employmentcontract.

13.3 Reasons for DismissalAn employee may be dismissed forreasons pertaining to the employee, inthe following cases:

■ if that employee is guilty of serious orrepeated misconduct as regards thework discipline regulations or thoseestablished by the employmentcontract, the applicable collectivebargaining agreement, or the internalregulations;

■ if the employee has been placedunder police custody for a periodexceeding 30 days, under the termsof the Criminal Procedure Code;

■ if the competent medicalexamination authorities determinethat the physical and/or mentalincapacity of that employee preventshim/her from accomplishing theduties related to his/her current workplace;

■ if that employee is not professionallyfit for his or her current position;

■ if an employee meets the standardage limit terms for retirement andhas made his or her social securitypayments in full, and has not appliedfor retirement under the law.

Dismissal for reasons not pertaining tothe employee is a redundancytermination.

The redundancy of a position must begenuine and must have a genuinecause.

The dismissal for reasons not pertainingto the employee’s person may beindividual or collective.

13.4 Special ProtectionEmployee dismissal may not be ordered:

■ for the duration of a temporarylabour disability, as established in amedical certificate;

■ for the duration of quarantine leave;

■ while an employee is pregnant,provided the employer has beeninformed about the pregnancybefore the dismissal decision;

■ for the duration of maternity leave;

■ for the duration of leave for takingcare of a child up to the age of two,or, in the case of a disabled child, upto the age of three;

■ for the duration of leave for lookingafter a sick child aged up to sevenyears, or, in the case of a disabledchild until he or she turns 18 years ofage;



168


■ for the duration of military service;

■ for the duration of the exercise of anelective position in a trade unionbody, and for the two years followingexpiry of their mandate, except whenthe dismissal is ordered forcommitting serious disciplinarymisconduct or for repeatedmisconduct;

■ for the duration of annual leave.

13.5 Closures and Collective DismissalsCollective dismissal involves dismissing,for reasons not pertaining to employees,within a 30 day period, at least10 employees (for companies with21-99 employees), 10 per cent ofemployees (for companies with 100-299employees), or 30 employees(for companies with at least300 employees).

Collective dismissal requires 30 days’prior notice to the tradeunions/employees’ representatives, theterritorial labour inspectorate and theterritorial agency for professionaloccupation and training. The noticemust state the intent to engage incollective dismissal and detail the socialprotection measures taken. If theproblems relating to the collectivedismissal cannot be solved within30 days, the territorial labourinspectorate may, at the request of aparty, extend the period by a maximumof 10 days. The dismissal decision isindividual and the serving of terminationnotices is mandatory.

Employers who have made collectivedismissals may not recruit into thepositions previously held by thedismissed employees for a nine-monthperiod from their dismissal, unless thedismissed employees were previouslyinformed and refused to be reintegrated.

Employees hired for indefinite periodswho are laid off through collectivedismissals during company restructuringor reorganisation processes, duringpartial or total cessation of the activity orduring privatisation or liquidation, maybenefit from social protection measuressuch as compensatory payments,collective pre-dismissal services

(e.g. outplacement counselling) andactive measures intended to limitunemployment.

14. Data Protection14.1 Employment RecordsUnder the Labour Code, an employerhas a general obligation to ensure theconfidentiality of its employees’ personaldata.

The Data Protection Law implementedthe Data Protection Directive 95/46/EC.

As a general principle, the processing ofpersonal data must be notified to theRomanian Personal Data ProcessingSupervisory Authority (the “Authority”).However, the processing by theemployer of the personal data of itsemployees in order to fulfil its legalobligations related to employment is notrequired to be notified to the Authority.

An employer need not obtain theexpress consent of the employee withrespect to the processing of personaldata when entering into the employmentcontract. Any further registration,organisation, storage, amendment, use,disclosure to third parties or transferoverseas of an employee’s personaldata must be made with the employee’sexpress consent, except where theemployer acts in order to fulfil its legalobligations related to employment.

In accordance with the principles set outin the Directive, the employer mustensure that the data is:

(a) processed fairly and lawfully;

(b) collected for specified, explicit andlegitimate purposes and not furtherprocessed in a way incompatiblewith those purposes;

(c) adequate, relevant and notexcessive in relation to the purposesfor which they are collected and/orfurther processed;

(d) accurate and, where necessary, keptup to date;

(e) kept in a form which permitsidentification of data subjects for nolonger than is necessary for the

purposes for which the data werecollected or for which they arefurther processed.

14.2 Employee Access to DataThe Employee has the following rights:

(a) the right to access the data: the rightto obtain from the controller uponrequest and at no expense for oneapplication a year, confirmation as towhether his or her personal data areor have been processed by theemployer;

(b) the right of intervention: the right toamend, update, block, delete andanonymise data the processing ofwhich does not comply with the law,especially incomplete or inaccuratedata;

(c) the right to object, for serious andlegitimate reasons related to his orher personal situation, to theprocessing of his or her personaldata, except as otherwise providedby the law;

(d) the right not to be subject toautomated decision making: theright not to be subject to a decisionwhich produces legal effectsconcerning him or significantlyaffects him and which is basedsolely on automated processing ofdata intended to evaluate certainpersonal aspects relating to him,such as his performance at work,creditworthiness, reliability, conduct,etc;

(e) the right of access to justice: theright to make a complaint to a courtof law for any breach of the rightsprovided by the Data ProtectionLaw.

14.3 MonitoringThe monitoring of employee email,Internet and telephone usage is notexpressly contemplated by the labourlegislation. Nevertheless, employers mayhave internal rules or policies that mayregulate these aspects.

As a general principle, employers havethe right to supervise the way theemployees fulfil their duties at work.


169


Unless it is performed in relation to thelegal obligations of the employer, thetransfer of data to third parties may beperformed only with the employee’sexpress consent. Furthermore, theemployer must authorise such transferwith the Authority. However, if thetransfer is to an EEA state or a non-EEAstate but where there is an adequatelevel of protection of personal data, theemployer need not obtain authorisationfrom the Authority, but only notify suchtransfer to the Authority.



170

Employment and Benefits in the European UnionSlovakia

Slovakia1. IntroductionThe principles of Slovak labour andemployment law are based uponremainders of labour regulationsapplicable prior to 1989. In 2002 thenew Labour Code Act No. 311/2001Coll. as amended (the “Labour Code”)replaced the previous Labour Code No.65/1965 Coll that had applied since1965, nevertheless the new LabourCode still follows some of the traditionalprinciples implemented in the past suchas equal protection of blue collarworkers, white collar workers andmanagers, restricted rights of theemployer to terminate employment andvery limited contractual freedom of theparties in the employment relations.The court practice concerningemployment relations is also affected bythe previous regime and it tends toprotect the employees’ rights over thoseof the employers’ in court disputes.Although in the past the governmentwas inclined to increase the level offlexibility in labour law relations andbalance the position of employer andemployee, the current government,headed by social democrats, hasproposed an amendment to the LabourCode, increasing the protection ofemployees and strengthening theposition of the trade unions. The draftamendment is currently subject toheated discussions as it is opposed byemployers’ associations.


2.1 GeneralThe Labour Code does not distinguishbetween blue collar workers, white collarworkers, managers or directors.All employees, regardless of theirposition, benefit from the same level ofprotection, and they are all subject toconditions negotiated with the tradeunion and agreed in the CollectiveAgreement. The Labour Coderecognizes the managers as a specificcategory of employees only in respect ofsome working conditions, such asadditional working duties. In otherrespects, including termination ofemployment, the position of managers isthe same as the position of regular

employees. An exception exists inrelation to top management; revocationof their appointment is a ground fortermination of their employment.Termination of their employment istherefore slightly more flexible than forregular employees.

3. Hiring3.1 RecruitmentThe recruitment process known as “pre-contractual relations” are specificallygoverned by the Labour Code.The employer is obliged to inform therecruit of salary and other workingconditions. If there are any specificrequirements on the employee such as ahealth requirement or special legalrequirements the employer may enterinto a labour relationship only with aperson who meets such requirements.The employer may require referencesand a previous job description with theexception of school graduates seekingfirst time employment. It is unlawful torequest information on pregnancy, familystatus, trade union or political partymembership or trustworthiness(existence of criminal records) frompotential employees. Review of criminalrecords is only allowed when it isessential in respect of the particularworking position. There are no legalguidelines, but it is reasonable todetermine the position by referring to theemployer’s internal regulations andrelevant collective agreements.Antidiscrimination laws and theobligation of equal treatment of theemployee applies also to the recruitmentprocess. The potential employee mayclaim financial compensation from theemployer if obligations relating to therecruitment process are breached. Thepotential employee is obliged to informthe potential employer about allcircumstances that could prevent himfrom performing the role or cause anyharm to the employer.

3.2 Work PermitsEU nationals have a position equal toSlovak citizens in respect of employmentin the Slovak Republic. A work permit isnecessary for non-EU nationals in orderto be employed in the Slovak Republic,except for cases determined by Act No.5/2004 Coll. on Employment (foreignSlovaks as defined, refugees or persons

under asylum laws, humanitarianorganization members, accreditedjournalists, etc.)

Slovak employers could be liable to afine if they employ a foreigner without avalid work permit. The work permit isissued by the regional labour office uponjoint application of the future employeeand future employer following a reviewof the labour market in the respectiveregion. In some cases the work permit isissued automatically. Work permits maybe issued for a maximum period of oneyear following which a further applicationmust be made and re-considered. Inaddition to the work permit, the non-EUnational intending to be employed in theSlovak Republic needs to securepermission from the regional policeoffices for temporary residency in theSlovak Republic.

4. DiscriminationThe prohibition of discrimination andobligation of equal treatment ofemployees is one of the basic principlesof the Labour Code. Section 13 of theLabour Code expressly prohibitsdiscrimination of employees andimposes an obligation on the employerto treat all employees equally. The Anti-discrimination Act No. 365/2004 Coll.became effective on July 1 2004, andexpressly prohibits discrimination inemployment relations based on gender,religion, race, nationality, health,disability, age or sexual orientation.The obligation of equal treatment appliesto access to employment, workingconditions, remuneration etc. Differenttreatment is permitted only if there arereasonable grounds due to the nature ofthe work and only if the extent of thisdifferent treatment is necessary for suchactivities or circumstances in which theyare performed.

Any person who claims discrimination,may apply to court and seek financialcompensation, amongst other remedies.


5.1 Freedom of ContractFreedom of contract within Slovaklabour law is very limited. All provisionsof the Labour Code are mandatory andbinding for the employer. The Labour


171

Inspection may impose a penalty on theemployer for each breach of the LabourCode; of up to SKK 1,000,000 (approx.c2600). Working conditions can onlydiffer from provisions of the LabourCode if they are more beneficial for theemployee than those provided for by theLabour Code.

5.2 FormThe labour relations in the SlovakRepublic are very formal. The labourcontract must be agreed and amendedin writing. The termination ofemployment is only valid if it is made ina prescribed form. The Labour Coderecognizes four types of labourcontracts (regular labour contracts, parttime labour contracts (for working timenot exceeding 20 hours per week),agreements on performance of work forlimited working tasks (not exceeding300 hours per year) and agreements onworking activity of students), and setsout the essential requirements in respectof each of them. There are fourunavoidable essentials of labourcontracts: job descriptions, place ofwork, start date and salary. The form isparticularly important in respect oftermination documents, particularly withregard to notices from the employer.Summary terminations and lack of formoften cause the termination ofemployment to be declared void by thecourts.

5.3 Trial PeriodsThe trial period may be agreed onlybefore the start date, in writing, for amaximum period of three months.The trial period may not be repeated.During the trial period either party mayterminate the employment immediately,without explanation.


The employee has a duty ofconfidentiality under the Labour Code.It applies during the employment, but itmay be extended under the contract foran unlimited period after the terminationof the employment. The remedy for thebreach of confidentiality after terminationof employment is, however, onlytheoretical as the Labour Code does notstipulate any fines or sanctionsapplicable after termination of the

employment therefore the remedy mustbe sought under other legislation (suchas the Commercial Code in respect ofthe protection of business secrecy andfair competition).

The Labour Code contains an explicitnon-competition clause applicableduring the employment, according towhich the employee may perform othergainful activity similar to the business ofthe employer only with prior writtenconsent of the employer that may berevoked at any time, except forscientific, pedagogical, publishing orartistic activity. A non-competition clauseapplicable after termination ofemployment is contrary to theconstitutional principle of the freedom ofprofession and would be null and void.

5.5 Intellectual PropertyAccording to the Act No. 618/2003 Coll.on Authors’ Law (the “Authors Act”) theright to execute the proprietary rights ofan author (copyright) of literature, soundrecording, movies, pictures and similarpieces of work belong to the employer ifthe particular piece of work was createdby the employee within the scope of theauthor’s working duties. The personalrights attached to the piece of work(right to state the name of author,as an example) remain with the author.The equivalent rights apply in relation tocomputer software governed by theAuthors Act and patents and inventionsupon the Patent Act 435/2001 Coll.

6. Pay and Benefits6.1 Basic PayThe minimum salary in the SlovakRepublic is stipulated by law and itcorresponds to SKK 7,600 per month(approx c225) and SKK 43,70 per hour(approx c1,30). The Labour Codedetermines six levels of work(from untrained workers to scientificprofessions) stipulating for each level acoefficient by which the minimum salarymust be multiplied. For the professionsat the sixth level the minimum salary isdouble the minimum wage determinedby law.

Collective Agreements commonly agreehigher rates of pay. Extra pay forovertime, work during holidays, work

during resting days (usually Saturdayand Sunday), night shifts and on call isobligatory.

The law does not provide for indexlinking of salaries. Such provisions areusually contained in the applicableCollective Agreements.

6.2 Private PensionsThe concept of private pensions is notdeveloped in the Slovak Republic.Apart from obligatory retirement pensioninsurance under the social insurancelaws there exists only so called“supplementary pension savings”governed by the specific Act onSupplementary Pension. The employeemay choose one of the private pensionsavings companies and would regularlycontribute certain amounts to the privatepension savings fund. The pensionsavings company will pay him asupplementary pension after he/shereached the statutory retirement age.The law enables the employer to enteran “employers’ agreement” with one ormore supplementary pension savingscompanies, upon which the employerundertakes to provide the contributionfor supplementary pension savings tothose employees who enter into theagreement with such pension savingscompany. The contribution of theemployer may not be less than two percent of the salary of the employee and isa tax deductible expense for theemployer. In some cases the individualCollective Agreements impose anobligation on the employer to enter intosuch an employers’ agreement.An obligation to contribute to theadditional pension savings of theemployees is imposed by law onemployers employing employees in jobsdetermined as risky by the public healthauthority (for example, jobs involvingexposure to life-threatening substances).

6.3 Incentive SchemesIt is not common for Slovak employersto operate share options schemes.Bonuses and profit-sharingarrangements are usually agreed, eitherin the labour contract or in the CollectiveAgreements.



172


6.4 Fringe BenefitsSlovak tax laws consider the private useby an employee of a company car to bea taxable benefit. Therefore it is moreusual to provide a company car to anemployee exclusively for work purposes.Use of a company car, mobile phone orpersonal computer are generallyregarded as the provision of equipmentnecessary for the performance of thework by the employee rather than as abenefit and are therefore provided onthis basis.

6.5 DeductionsThe employer is obliged by law todeduct the income tax (of 19 per cent)and social contributions from the salaryof the employee. The employers are alsoobliged to deduct part of the salaries ofthe employees where an order of anexecutor or court applies.

7. Social Security7.1 CoverageThe public social security systemincludes retirement pension insurance,disability pension insurance, illnessinsurance, injury through work andunemployment insurance and healthinsurance.

7.2 ContributionsBoth employees and employercontribute into the social securitysystem. The rates are broadly asfollows:

These rates are applied to salary equalto the national minimum wage up tothree times the average national salarydetermined by the Statistics Office, withthe exception of illness insurance andguarantee, where the rates are appliedup to a 1.5 multiple of the averagenational salary and health insurance,has no upper limit.

8. Hours of WorkThe maximum number of working hoursaccording to the Labour Code is40 hours per week exclusive of breaks.For employees working in shift operationsit is 38.75 hours per week andemployees in three shift nonstopoperations - 37.5 hours per week.For employees up to 16 years of age themaximum working hours are 30 hoursper week, for employees between16 and 18 years of age the maximumworking hours are 37.5 hours per weekincluding overtime.

Collective Agreements may provide forshorter but not longer working hours.

A break has to be provided if theworking shift of the employee would lastfor six hours or more, with a minimumduration of half an hour. The breakbetween two shifts, except for certainprofessions and situations, cannot beless than 12 hours or 14 hours foryoung employees. Each week theemployee should have two resting daysthat should be Saturday and Sunday orSunday and Monday, except for specialprofessions and operations (e.g. shops).

Work performed in excess of the usualworking hours, upon order of theemployer or agreement, constitutesovertime. The number of overtime hoursis limited; working hours includingovertime cannot exceed 48 hours per

week, overtime cannot be ordered formore than 150 hours per year unlessthere exists a specific written agreementbetween the employee and theemployer by which the number ofovertime hours may be increased to 250hours per year. The employee is entitledto receive the extra payment forovertime amounting to 25 per centincrease in pay, unless it has beenagreed in the labour contracts that

overtime is included in his/her basicsalary (such agreement is permitted onlyin relation to 150 hours of overtime ayear, except for managers where there isno limit). The employee and theemployer may agree that instead ofpayment for overtime the employee willbe entitled to additional time off.

9. Holidays and Time Off9.1 HolidaysThe employees are entitled to salarycompensation for absence from work onpublic holidays, if the holiday falls on aday that would otherwise be a regularworking day for the employee.Such compensation is calculated on theaverage earnings inclusive of the basicsalary and all benefits provided withinthe previous calendar quarter.

All employees are entitled to four weeksof regular holiday a year. An employeeworking for 15 plus years is entitled tofive weeks a year. A week for thispurpose means five working days(not Saturdays and Sundays).

9.2 Family LeavePregnant women are entitled to paidmaternity leave for a period of28 weeks. If she gave birth to two ormore children or if she is a sole parent,the maternity leave is extended to37 weeks. If the father takes paternityleave to care for the child he is alsoentitled to the same leave, but only one

parent can take such leave. Maternitypayments are provided by the SocialInsurance Company from the funds ofthe illness insurance. The maternityleave usually starts six weeks before theexpected date of birth.

The employer is also obliged to provideto the employee upon her/his requestparental leave until their child is threeyears of age. If the health of the child


173

Illness Pension insurance Guarantee Unemployment Health Working Injury Solidarity Fundinsurance Insurance Insurance

Retirement DisabilityInsurance Insurance

Employee 1.4% 4% 3% – 1% 4% -

Employer 1.4% 14% 3% 0.25% 1% 10% 0.3 - 2.1% 4.75%

Total 2.8% 18% 6% 0.25% 2% 14% 0.3 - 2.1%

requires additional care, parental leaveshould be provided until the child is sixyears old. During parental leave theemployee is entitled only to the parentalcontribution paid by the state.

9.3 IllnessEmployers pay an illness contribution tothe employees for the first 10 days ofabsence (including Sundays andSaturdays) the amount of which isstipulated by social insuranceregulations. After the initial 10 days theillness allowance is paid by the stateSocial Insurance Company.

10. Health and Safety10.1 AccidentsThe Labour Code and specific lawsimpose obligations on the employer toprovide safe working conditions andhealth protection and to protectemployees from accidents at work.State governed bodies such as theLabour Inspection or Health and theSafety of Work Inspection regularlycheck compliance with these conditions.

10.2 Health and Safety ConsultationThe employer appoints a “safetycommission” from the employees thatparticipate on internal reviews ofworking safety. This reaches jointdecisions with the employer in relation tosafe working conditions.

11. Industrial Relations11.1 Trade UnionsTrade Unions in the Slovak Republichave the position of civic associationsregistered with the Ministry of InteriorAffairs. There is no nation-wide tradeunion and the employees in eachworkplace may create their ownassociation. There are trade unionassociations for specific industries ortrades (e.g. trade union association offood stuff workers, trade unions formetal processing industry) thatcommunicate with the employers tradeassociations with the intention ofnegotiating the Collective Agreements ofSuperior Level. Such trade unionsusually succeed in establishing theirpresence in the workplaces of majoremployers.

If there is no trade union unit at theworkplace the employees may elect a

works council (if there are more than20 employees) or a worksrepresentative. The employer is notobliged to order an election of the workscouncil or works representatives unlessrequested to do so by the employees.

11.2 Collective AgreementsAccording to the specific Act onCollective Bargaining each trade unionunit has the authority to negotiate, withthe employer, the individual CollectiveAgreement applicable for all employeesincluding managers and directors.The individual Collective Agreementsmay only provide for more beneficialworking conditions of employees thanthose provided by the Labour Code. Theprovisions of the Collective Agreementare binding on the employer and theytake precedence over provisions ofparticular labour contracts. To the extentthat the labour contract provides a lowerlevel of benefits than the CollectiveAgreement, the provision of the labourcontract is null and void. The CollectiveAgreement of Superior Level is agreedbetween the trade unions’ associationsand employers’ association and takeprecedence over any applicableindividual Collective Agreements to theextent that such Collective Agreement ofSuperior Level provides for a higher levelof employee benefits. The CollectiveAgreements of Superior Level are storedby the Ministry of Interior Affairs and arepublicly accessible.

11.3 Trade DisputesThe Act on Collective Bargaininggoverns the resolution of the tradedisputes. Each dispute should besubmitted to the mediator and later tothe arbitrator and only if they are notresolved in such proceedings is a strikelawfully permitted.


The role of the trade unions and otheremployee representatives is governedby the Labour Code which imposes anobligation on the employer to inform thetrade unions, consult with them andjointly decide particular issues. Jointdecision with the trade unions isrequired in respect of the approval of theinternal working order of working hoursschedules. Consultations are required in

respect of termination of employment bynotice or summary termination by theemployer or in respect of collectivedismissals.

12. Mergers andAcquisition

12.1 GeneralSlovak law provides that a merger mayoccur by way of merger of twocompanies to form a new entity or whenone company absorbs another.

The term ’acquisition’ can mean eitherthe acquisition of the shares of acompany or the acquisition of acompany’s assets. A share acquisitionwill have no impact on employmentrelations as there is no change in theidentity of the employer. In the event ofan asset acquisition the acquirer of theassets acquires all the rights andliabilities attached to the assets includingthose related to employment relations.


The employer is obliged, in general, toconsult the employee representatives inrelation to material issues relating to itsexistence and profit. In particular, theemployer must inform the employeerepresentatives/or employees directly(if there is no representative) in writing ofthe:

(a) date or intended date of transfer;

(b) reasons for transfer;

(c) working, economical and socialimpacts for employees;

(d) measures related to transfer affectingthe employees.

This information must be provided onemonth prior to the transfer, whether thatoccurs by reason of merger, takeover orsale and purchase.

In addition, no later than one monthbefore the transfer the employer has toconsult with the employees’representatives.

Should the transfer of the employeesinclude redundancy terminations, theprovisions on collective dismissal wouldapply (see below 13.5).



174


12.3 Notification of AuthoritiesIn respect of all types of mergers andacquisitions there are certain obligationsto notify and/or to seek the approval ofthe authorities, however there are nosuch specific obligations in relation toemployment relations and/or the transferof employees.

12.4 LiabilitiesThe Inspection of Work may impose apenalty of up to SKK1,000,000 on anemployer that has breached itsinformation or consultation duties.The validity of a particular merger oracquisition and related transfer of theemployees is not however affected bysuch a breach or by the sanction.

13. Termination13.1 Individual TerminationAn employer wishing to terminate theemployment relationship may only do soin accordance with the provisions of theLabour Code.

Until 2002 the Labour Court stipulatedthat severance pay had to be providedto any employee whose employmentwas terminated due to organisationalreasons. Although this provision hasbeen revoked, it is quite usual forindividual Collective Agreements toprovide for such severance pay, usuallyin the region of two to three months’salary. The employer is obliged to payan employee compensation equal to thesalary that would otherwise be paidduring the notice period if the groundsfor termination on notice is theorganisational change, but the employeeagreed to terminate the employmentearlier.

A draft amendment to the Labour Codecurrently in the legislative processintends to re-introduce the obligation toprovide a severance payment to anemployee in the case of termination oftheir employment due to organisationalreasons. It is proposed that the amountof such severance payment should betwice the average monthly earnings, orthree times the average monthlyearnings if the employee worked for fiveor more years for the employer.

If the reason for terminating theemployment is due to a work accident

or occupational disease, or a threatthereof, or by reason that the employeeexceeded the maximum permitted levelof exposure to a dangerousenvironment, the proposed severancepay should be an amount ten times theaverage monthly earnings of theemployee.

13.2 Notice PeriodsThe notice obligation in case of theemployer is two months if theemployee’s service has not exceededfive years, otherwise it is three months.The notice obligation in the case of theemployee is two months. The noticeperiod starts on the first day of thecalendar month following the month inwhich the notice was delivered to thecounter party.

13.3 Reasons for DismissalThe employee may terminate theemployment by notice at anytimewithout cause. The employer may onlyterminate employment for one of thereasons determined by the LabourCode. Such reasons are few, andinclude redundancy of the employee asa result of organizational changes, lackof capability due to the employee’shealth, failure by the employee to fulfillspecific requirements of the law oremployer for performance of the work,breach of working discipline and alsoinsufficient performance by theemployee provided that severalconditions are met (e.g. prior writtenwarnings). The termination ofemployment by the employer requiresmany preconditions to be satisfied. Theemployer is very limited in respect oftermination of labour relations with itsemployees. In the past the excuse of“organizational changes” was often usedby employers to justify the termination ofthe employment. However, the law nowrestricts an employer who has made aposition redundant to recruit to thatposition within the subsequent threemonths.

Notice of dismissal is valid only ifconsultation has been carried out inadvance with the employeerepresentatives. The notice must begiven in writing, state the cause of thenotice by reference to the provision ofthe Labour Code and also describe the

circumstances or facts that are thecause of such notice. The notice mustbe delivered to the employee at thework place or, if not possible, at hishome. Notice that does not fulfil theformal requirements is likely to bedetermined as void by the courts. If thenotice is given on the grounds of breachof discipline, the employer has to allowthe employee to state his/her case onalleged breach prior to giving notice tothe employee in question.

Summary termination of employment ispossible only where the employee or theemployer has serious cause.The employer may summarily dismiss anemployee who has been found guilty ofa malicious crime or who is guilty of anextraordinary beach of work discipline.Although the Labour Code does notdefine such a breach, it is sufficientlydefined by court practice. Determinationof whether a particular breach wasgrounds for summary termination is oneof the most frequent subjects of labourlaw disputes in the Slovak Republic.The employee may immediatelyterminate the employment if theemployer is in default with payment of allor part of his salary or if his health andsafety is threatened.

An employee may bring courtproceedings on the grounds that the actby which his or her employment wasterminated was invalid. Such claim mustbe brought within two months of thealleged termination of employment. If theclaim succeeds the court may award theemployee salary compensation for theentire duration of the court proceedings.Such salary compensation may bereduced by the court at the solediscretion of the judge, at the request ofthe employer, if the period for which thecompensation is provided shouldexceed nine months.

13.4 Special ProtectionThe Labour Code specifies certainprotection periods during which theemployment may not be terminated bynotice, such as pregnancy, illness ormilitary service.

13.5 Collective DismissalsTermination of the employment by noticeor agreement due to organisational


175

reasons is considered a collectivedismissal if it affects more than20 employees in a period of 90 days orless. The Labour Code requires specificconsultation with the trade unions andregional labour office in the case of thecollective dismissals. At least one monthprior to the start of the collectivedismissals the employer has to informthe trade unions of the collectivedismissal and discuss with thempotential options to minimise thenegative effect of the collectivedismissal. Information on suchdiscussion must be delivered to theregional labour office which alsoparticipates in the consultations.

14. Data Protection14.1 Employment RecordsThe collection, storage and use ofpersonal data held by employers abouttheir (prospective, current and past)employees and workers are regulated bythe Act No. 428/2002 Coll. on PersonalData Protection as amended, whichimplements the EU Data ProtectionDirective. As it does not contain anyspecial provisions in respect ofemployment records, the generalprinciples set down therein for dataprocessing apply. The general ruleapplying to the processing of personaldata is that unless a specific lawprovides otherwise, the prior consent ofthe data subject is required for theprocessing. The data controller must beable to prove that the consent is valid.The consent may be revoked at anytime.

Employers, as data controllers, areobliged to ensure that only the personaldata that corresponds to the purpose ofprocessing by the extent and content areprocessed. In addition, employers areobliged to process only accurate,complete and up-to-date personal datain relation to the purpose of processing;inaccurate and incomplete personal datamust be blocked and corrected orupdated without undue delay, otherwisethe data controller must erase such data.

Employers are responsible for thesecurity of personal data and mustprotect the data from accidental orillegal damage, destruction and loss,unauthorised access or modification as

well as any other inadmissible form ofprocessing by adopting appropriatetechnical, organisational, and personnelmeasures corresponding to the mannerof processing.

Any person who has access toprocessed personal data is obliged tokeep the data confidential.

The draft amendment to the LabourCode propose to restrict the processingof personal data by the employers tosuch employee personal data that isinevitable for the employmentrelationship, or that relate to thequalification and working experience ofthe employee.

14.2 Employee Access to DataEmployees, as data subjects, have theright to request from the data controllerin writing: information about the statusof processing of their personal data,detailed information on the source ofpersonal data, a copy of his/herpersonal data being processed,correction of inaccurate or out of datepersonal data, erasure of personal dataif the purpose of processing has beencompleted or if the processing hasinvolved a breach of the law.

Requests of the data subject must becomplied with by the data controller andthe applicant notified of the outcome inwritten form, within 30 days from thereceipt of the request. The datacontroller must provide the informationwithout charge, apart from theinformation on the source of personaldata and copy of the personal databeing processed, in which case it isentitled to levy a fee not exceeding thecosts of the copies, materials andposting of the information to the datasubject, unless the specific lawstipulates otherwise.

14.3 MonitoringThe monitoring of employee e-mail,Internet and telephone usage and TVmonitoring is governed by the CivilCode, according to which documents ofpersonal nature, video and audiorecords concerning an individual can bemade and used only with his/herconsent.

The Data Protection Act, permits theaudio or video monitoring of publiclyaccessible premises for the purposes ofpublic order and security, and providedthat clear warning is given that themonitoring is taking place (except asspecified by the criminal law). If therecord is not used for the purposes ofprosecuting an offence or criminal act,it must be deleted within seven daysfrom its creation.

The draft amendment to the LabourCode intends to expressly prohibitemployers from monitoring theiremployees and monitoring or recordingtheir mail, e-mail or telephone calls.Monitoring would only be permitted ifrequired, by the specific character of theemployer’s operation, and in suchcases, only after providing completeinformation on the monitoring to theemployee.


An employer who wishes to provide thedata of employees to third parties mustdo so in accordance with the principlesand processing conditions set down inthe Data Protection Act. The personaldata may be transmitted from theinformation system to a third person,including abroad – regardless of whetherthe third person is based within oroutside the European Union, only withthe consent of the data subject.



176

Employment and Benefits in the European UnionSlovenia

Slovenia1. IntroductionThe Employment Relationships Act(Zakon o delovnih razmerjih) is theprincipal law regulating labour issues inSlovenia. It took effect on 1 January2003, and basically regulates allemployment relationships in both theprivate and public sector. Collectiveagreements, individual employmentcontracts, the employer’s generalactions, works agreements andindividual employment contracts alsoregulate the employment relationship.

All Slovenian employees have topossess an employment booklet, inwhich certain data is recorded. Thisemployment booklet is issued by thecompetent administrative authority andis kept by the employer during theemployment relationship.

Numerous trade unions are active inSlovenia. Due to obligatory bargainingconditions, most business sectors usecollective agreements, however,individual employment contracts maycontain provisions that are morebeneficial to the employee than those inthe Employment Relationships Act orother collective agreements.

Employees’ participation rights aregoverned by the Law on WorkerParticipation in Management whichprovides for various forms of employeeparticipation.

Labour disputes, whether individual orcollective, are settled by special labourcourts. An appeal from the labour courtis heard by the Higher Labour andSocial Court (Vis̆je delovno in socialnosodis̆c̆e).


2.1 GeneralSlovenian law does not differentiatebetween blue collar employees andwhite collar employees. However, thelaw differentiates between “normal”employees and managerial staff, as wellas between full-time employees andpart-time employees.

3. Hiring3.1 RecruitmentGenerally, an employer has to advertisevacancies in the public areas of theemployment service office. In addition,the advertisement has to set out therequirements of the job and may notspecify a particular gender unlessgender is an essential condition forcarrying out the work. A deadline for thesubmission of applications must beestablished although there are someexceptions to this obligation.

An employer who employs part-timeemployees or employees with a fixed-term employment contract has to informsuch employees of any available full-timepositions of a fixed term or indefinitenature.

Employers with more than 20 employeesare obliged to employ a certainpercentage of disabled peopledepending on the type of business. If theemployer does not meet this obligation,it has to pay 70 per cent of the minimumsalary to the competent social securityauthorities for each disabled person ithas not employed below 20.

3.2 Work PermitsThe Slovenian Act on Employment andWork of Aliens (Zakon o zaposlovanju indelu tujcev) refers to three different kindsof work permits: i) personal workpermits, ii) permits for employment, andiii) permits for work. Every work permit issubject to different requirements.Permits for employment and permits forwork are issued by observing a quotadetermined by the Sloveniangovernment. Whereas a personal workpermit allows general access to theSlovenian labour market, a permit foremployment and a permit for work arelinked to a specific workplace and haveto be applied for by the employer.

A foreigner or a person without Sloveniancitizenship may only enter into anemployment contract if he or she fulfilsthe conditions set out in the SlovenianAct on Employment and Work of Aliens.

Citizens of EU countries are exemptfrom the obligation to obtain a permitbefore commencing work; however,there is still a notification obligation.

4. DiscriminationDiscrimination by the employer onvarious grounds (e.g. sex, race,disability, sexual orientation, religion,age), even if only indirect, is prohibited.The shifting of the burden of proof helpsthe employee in proving anydiscrimination.


5.1 Freedom of contractIn general, an employment contract issubject to the general rules of civil law.However, the Employment RelationshipsAct imposes restrictions on the freedomto contract. Provisions in anemployment contract may only departfrom applicable legal requirements andcollective agreements if doing so isbeneficial to the employee.

The conclusion of a fixed-termemployment contract is only permissiblein the circumstances prescribed in theEmployment Relationships Act. A fixed-term employment contract orsubsequent, successive fixed-termemployment contracts concluded withthe same employee in relation to thesame job may not exceed a period oftwo years (in aggregate).

5.2 FormEmployment contracts have to beexecuted in writing. The employer has toforward to the employee a written draftof the employment contract three daysbefore the anticipated execution. Afterthe execution of the employmentcontract, the employer has to hand overto the employee a written executedcopy of the employment contract.However, violation of this formalrequirement does not lead to thenullification of the employment contract.

In addition, the EmploymentRelationships Act stipulates a minimumcontent for the employment contract.If the employment contract does notcontain all required elements, the lawprovides for the automatic application ofthe relevant legal provisions andcollective agreements.

5.3 Trial PeriodsGenerally, a trial period is permissible.A probationary period must be agreed


177

upon in the employment contract. A trialperiod does not, however provide theemployer with the right to rescind thecontract - only the employee mayterminate the employment contract forany reason by adhering to a noticeperiod of seven days.

The employer may exceptionally,terminate the employment relationshipafter the expiry of the trial period if theemployee performed his or her dutiesunsatisfactorily during the trial period.


The employee may not disclosebusiness secrets to a third person orexploit such secrets for his or her privateuse. Generally, the employee is liable indamages for any violation of thisobligation.

During the employment relationship, theemployee may not render services orconclude a transaction on his ownbehalf in competition with the employer.In certain cases, the parties to theemployment contract may agree upon aprohibition of competition for a specifiedperiod after the termination ofemployment. However, a non-competition clause may not exceed aterm of two years after the terminationof employment. It is only enforceable ifthe employment relationship has beenterminated by the employee or as aresult of his or her actions. Under certaincircumstances the employer has to paycompensation for enforcing the non-compete provision.

5.5 Intellectual PropertyBasically, the mandatory provisions ofthe Law on Intellectual Property Rightsin Connection with Employmentdifferentiate between employment-related inventions and so-called freeinventions. Employment inventions arefurther divided into direct and indirectinventions. Direct inventions are thosegenerated within the contractuallyrequired employment tasks or expresslyrequired by the employer, while indirectinventions are those generated beyondthe scope of employment, but theemployment experience and employer’sfacilities contributed considerably tosuch inventions. The employer is entitled

to assume rights to inventions related toemployment and may register theinvention as a patent with the IPauthority on the employer’s behalf.Inventions may be taken over for certainconsideration, either exclusively or non-exclusively.

6. Pay and benefits6.1 Basic PayIn Slovenia, the minimum wage amountsto a monthly salary of EUR 522.Basically, the Slovenian wage has threeprincipal components: (i) basic wage,(ii) wage for job performance, and(iii) extra payments.

Employees are entitled to extrapayments related to extraordinaryworking times, e.g. night shift, overtimework, and Sunday working, holidays andwork-free days. The amount of suchextra payments is regularly stipulated bycollective agreements. The law alsoprovides for an extra payment based onthe employee’s years of service, whichamounts to an automatic pay increasebased on years of service.

Moreover, there are certain voluntarywage components that may be fixed inthe employment contract: remunerationfor business performance, profit-sharing,and payments in kind.


6.2 Private PensionsIn Slovenia, employers are not obliged toinclude or pay for employees’ privatepensions.

In practice, a considerable number ofwell established employers provide fortheir employees’ participation inadditional collective pension schemes.In addition, some employees enter intoadditional pension insurance plans on anindividual basis. Altogether, about 60 percent of Slovenian employees haveadditional private pension insurance.

6.3 Incentive SchemesShares schemes are not mandatory inSlovenia, however share schemes andprofit sharing have been increasinglyfocused on by trade unions andemployers’ representatives.

6.4 Fringe benefitsIn practice, it is uncommon foremployers to grant fringe benefits suchas a company car or additional personalinjury insurance to their employees,unless certain benefits are crucial to aspecific type of job performance.Sales agents are often granted acompany car and phone. Tax legislationdoes not encourage the granting ofsuch benefits.

Apart from work-related needs, it israther common for employers to grantcertain benefits such as the use of acompany car, phone, additional personalinjury insurance and the like tomanagerial staff.

6.5 DeductionsEmployers are obliged to deduct incometax advances and social securitycontributions from the salary of theiremployees.

7. Social security7.1 CoverageAn employer has to register theemployee for obligatory pension,disability, health, parental andunemployment insurance on the day theemployee’s work commences.The social security system providesbenefits in the case of retirement,disability, death, sickness, injuries(regardless of whether employment-related or not), occupational disease,pregnancy, maternity andunemployment.

7.2 ContributionsEmployees’ social security contributionsamount to 22.10 per cent of anemployee’s salary, while employers’social security contributions amount to16.10 per cent of an employee’s salary.

8. Hours of workIn Slovenia, the normal working week is40 hours. The employer’s generalactions or a collective agreement maydecrease the normal working time,although it may never amount to lessthan 36 hours, except in relation toemployees who are exposed to agreater risk of injury or damage tohealth.



178


Working hours comprise an employee’seffective working time plus breaks.Hence, a daily break of half an hour iscounted as part of the working hours.

There are certain limits to renderingovertime: overtime may not exceed eighthours per week, 20 hours per month,and 180 hours per year. The EmploymentRelationships Act and some collectiveagreements stipulate certain cases inwhich overtime may not be ordered.

9. Holidays and Time Off9.1 HolidaysAn employee has the right to paidabsence from work on public holidaysrecognized in the Republic of Slovenia,specified as work-free days, and onother work-free days as specified bylaw.

An employee is entitled to at least fourweeks of holiday per calendar year.Under the Employment RelationshipsAct, certain employees are entitled to alonger annual leave period.

9.2 Family LeaveA female employee may take paidmaternity leave for a period of 42 daysbefore the child’s expected due dateand is obliged to go on maternity leavefor a period of 28 days before theexpected due date. Female employeesare entitled to paid maternity leave for aperiod of 105 days altogether,i.e. including the leave before the child’sbirth. Payments during maternity leaveare borne by social security.

In addition, the father is entitled to15 days’ additional leave to be takenduring the first six months after childbirthand an additional 75 days leave to betaken before the child’s third birthday.

After the maternity leave has expired,either the mother or the father of thechild is entitled to 260 days of parentalleave, which may be used as full-timeabsence from work, or alternatively, aspart-time absence from work, in whichcase the period of absence is longer.Payments during paternal leave areborne by social security.

Parental leave may be extended undercertain circumstances.

9.3 IllnessIn the case of temporary incapacity dueto injury or disease, an employee isentitled to be absent from work. Theemployer has to pay wagecompensation out of its own funds inthe case of such absence from workdue to health reasons for a period of upto 30 days for each individual absence.In relation to injury or disease notconnected to work, there is a limit of120 working days per calendar year. Inthe event of a longer absence fromwork, the employer will be refunded byhealth insurance. If the absence fromwork does not result from anoccupational disease or an injury relatedto work, the wage compensationamounts to 80 per cent of theemployee’s wage.

10. Health and Safety10.1 AccidentsThe employer has to ensure thatworking conditions meet the regulationsapplicable to health and safety in theworkplace. This is verified occasionallythrough a labour inspection.

10.2 Health and safety consultationAccording to the Act on OccupationalHealth and Safety, the employer mayensure health and safety by appointingan expert employee who fulfils certaintasks related to safety at work, as wellas an authorised physician for thepurpose of ensuring health at work.

The expert employee in charge of safetyat work has to pass a special exam.However, the employer may also hire anexternal expert employee or externalexpert bodies to conduct such tasks.Certain restrictions apply.

11. Industrial Relations11.1 Trade UnionsA trade union that has membersworking for a particular employer mayappoint or elect a trade unionrepresentative to represent the tradeunion at the employer’s place ofbusiness. The employer has to beinformed of the appointment or electionof such trade union representative.Furthermore, the trade unionrepresentative has the right to protectthe rights and interests of the employeesat the employer’s place of business.

11.2 Collective AgreementsSlovenian law recognizes generalcollective agreements, branch collectiveagreements, and company collectiveagreements. Now general collectiveagreements are only recognised for thenon-economic public sector of theRepublic of Slovenia (previously, generalcollective agreements were alsorecognised for the commercial sector).

The parties to collective bargainingcomprise: (i) the associations ofemployers using general and branchcollective agreements, or the employeritself in the case of company collectiveagreements, and (ii) the associations oftrade unions or trade unions at theemployer’s place of business in the caseof company collective agreements.

11.3 Trade DisputesEmployees have the right to strike,which is exercised collectively. The rightto strike is enshrined both in theConstitution and in the Strike Act.

Generally, disputes between employersand trade unions should be resolved incompliance with applicable collectiveagreements.


Employees have the right to participatein the management of the employer.Such participation may either beperformed by a workers’ representativeor a works council, depending on thesize of the employer’s company. Thereare three forms of participation: (i) theright to information, (ii) the right toconsultation, and (iii) the right toparticipation in decision-making.If certain participation rights areneglected by the employer, the workscouncil may stay a decision by theemployer.

Moreover, employees may have certainparticipation rights in managementbodies. Workers’ participation inmanagement bodies is implementedthrough representatives acting on acompany supervisory board, thesupervisory committee of a cooperative,or through an employee representativewithin the company’s management.


179

Participation rights may also beextended or their exercise regulated inmore detail by a works agreement.


12.1 GeneralIf the employer changes due to the legaltransfer of a business in whole or inpart, the contractual and other rightsand obligations arising from theemployment relationship that theemployees had on the day of thetransfer are automatically transferred tothe transferee. Any rights andobligations under the collectiveagreement that bound the transferormust be guaranteed by the transfereefor at least one year, unless thecollective agreement expires earlier orunless a new collective agreement isconcluded during this period. Inaddition, certain information andconsultation obligations of the transferorand the transferee apply in the event ofthe transfer of a business.

If the employee refuses to transfer, thisgives the employer (ie the transferor) areason to terminate the employmentrelationship.

The rules in Slovenia in relation tomergers and acquisitions are extremelyrecent and accordingly there is relativelylittle information available in relation totheir application in practice.


The transferor and the transferee mustinform trade unions of the reasons fortransfer, the legal, social and economicimplications of the transfer for theemployees and the measurescontemplated in respect of theemployees at least 30 days prior to thetransfer of the business. In addition, thetransferor and the transferee need toconsult with these trade unions on thelegal, social and economic implicationsof the transfer for the employees andthe measures considered in relation tothe employees at least 15 days beforethe transfer. The purpose of theconsultation is to reach an agreementon these topics. If a trade union has notbeen established at the employer, thetransferor and the transferee have to

inform the employees directly. Additionalconsultation obligations may arise in theevent of any organisational changes inthe business operation.

13. Termination13.1 Individual TerminationAn employer wishing to terminate theemployment relationship must be carefulto comply with the statutoryrequirements as regards reasons andprocedure.

Employees with service of more thanone year and whose employmentcontract was terminated by theemployer through ordinary terminationdue to business reasons or for reasonsof incapacity, are entitled to a severancepayment. The amount of suchseverance payment is dependent on theemployee’s years of service (rangingfrom one fifth of a monthly salary to10 months’ salary).

Also, if the employee retires and theemployment relationship is terminated,he or she is entitled to severance pay.

13.2 NoticeThe minimum notice entitlement isdictated by the reason for terminationand the duration of service.

If termination is based on businessreasons, the minimum notice periodamounts to 30 days and increases withthe length of service to up to 150 days. Ifthe reason for termination is related to theincapacity of the employee, the minimumnotice period also amounts to 30 daysand increases with the years of service toup to 120 days. If the employerterminates the employment relationshipdue to the employee’s capability orconduct, the minimum notice period isalways 30 days. Specific notice periodsapply in some circumstances (e.g.bankruptcy or liquidation proceedings).

The parties to the employment contractmay agree, in writing, on compensationinstead of observance of the noticeperiod.

Prior to an ordinary termination ofemployment, the employer has to meetinformation obligations and is subject tothe duty to warn. Except in the case of

a termination due to business reasons,the employer has to provide theemployee with an opportunity to defendhimself.

Upon the request of the employee, theemployer has to inform the trade union,if any, in writing about the intendedtermination. If the trade union hasopposed the termination, the employeemay request that the termination notbecome effective until thecommencement of arbitration and/ orjudicial protection has begun.The employee may also seek a temporaryinjunction within the course of thejudicial proceedings, which has theeffect of further postponing thetermination date.

Any notice of termination has to be inwriting. The employer has to cite thereasons for termination and has toinform the employee of the availablelegal remedies and the employee’s rightsto unemployment insurance.

Dismissal without notice is onlypermissible if the employer’s reason fordoing so is acceptable for the purposesof the Employment Relationship Act.The law sets a high standard. In additionto having a legitimate reason for thepurposes of the EmploymentRelationships Act, the continuation of theemployment relationship until the expiryof the notice period or a fixed term mustalso be unreasonable for the employer.

The employer has to inform theemployee of the dismissal without noticewithin 15 days of becoming aware of itsreason and not later than six monthsfrom the occurrence of the action thatgave rise to such reason.

Also, the employee may terminate theemployment relationship without notice,again for a reason stipulated by law(e.g. material breach of contract).Eight days before the employee mayextraordinarily terminate hisemployment, such employee has to callon the employer and advise theemployer to fulfil its obligations.Simultaneously, it has to inform thelabour inspectorate of the employer’sviolations in writing. If the employee hasadhered to this procedure, he may



180


terminate the employment for thereasons stipulated by law.

Mutual termination of the employmentcontract requires a written contractbetween the employer and theemployee. If the parties do not adhereto this formal requirement, the mutualtermination is invalid.

13.3 Reasons for DismissalIn Slovenia, the employer may neverterminate the employment relationshipwithout reason. Consequently, theemployer may base the ordinarytermination on three different reasons:(i) business reasons, (ii) the incapacity ofthe employee, and (iii) reasons of fault.In any case, the reason for terminationhas to be substantiated and has torender continuation of the employmentrelationship impossible.

In the case of termination on thegrounds of the incapacity of theemployee or for business reasons, theemployer is obliged to examine whetherit is possible to employ the employeeunder different conditions or to transferhim to another post, and/or whether it ispossible to retrain the worker.

Additionally, the EmploymentRelationships Act sets out certainreasons where termination is consideredto be unfounded.

The employee does not need to cite areason for his resignation on notice.

The employee may assert the illegality oftermination within 30 days of theviolation of his rights (i.e. from the noticeof termination) before the competentlabour court.

If the labour court finds that theemployer’s termination was illegal andthat the employee does not intend tocontinue the employment relationship, itshall - at the employee’s request -establish the existence of anemployment relationship, but notbeyond the first instance judgement.The court will also determine theemployee’s length of service and otherrights arising from the employmentrelationship, as well as the employee’scompensation in light of the applicablecivil law.

13.4 Special ProtectionCertain categories of employee enjoyspecial protection against termination:members of the works council, workers’representatives, females duringpregnancy, parents, disabled persons,and persons absent from work becauseof disease.

13.5 Closures and Collective dismissalsA specific procedure has to be adheredto if the employer intends to dismiss alarger number of employees due tobusiness reasons. For example, thedismissal of at least 10 employees by anemployer employing more than 20 butless than 100 employees qualifies as acollective dismissal.

In these circumstances the employer isobliged to draft a dismissal program.The Employment Relationships Lawstipulates the material content of suchdismissal program. In addition, theemployer has to inform the trade unionand the employment service of itsintention. The employer may notterminate any employment relationshipfor a period of 30 days from notificationof the employment service (“blockingperiod”). The employment service mayeven extend this blocking period to60 days.

14. Data Protection14.1 Employment RecordsThe employer is obliged to protect thepersonal data of employees. Hence,data on employees may only becollected, processed, used andprovided to third parties if theEmployment Relationships Act oranother law so stipulates, or if this isrequired in order to exercise the rightsand obligations arising as a result of theemployment relationship.

14.2 Employees’ Access to DataEmployees’ access to data is usuallyregulated in the employer’s internaldocuments, e.g. the employer’s generalact (pravilnik).

14.3 MonitoringThe Employment Relationships Act andthe Act on Data Protection do notinclude provisions regarding themonitoring of employeecommunications. However, provisions

regarding monitoring are usuallyincluded in the employer’s internaldocuments, e.g. the employer’s generalact (pravilnik).

The Act on Data Protection permits anemployer to use video monitoring on thebusiness premises in extraordinarycases. Video monitoring can be carriedout if necessary to preserve the safety ofpeople or assets or for the protection ofsecret information and business secretsprovided that there are no less intrusivemeans by which these aims can beachieved. The employees have to benotified in advance of the videomonitoring. In any event, videomonitoring is prohibited in locker rooms,lifts and sanitation areas.


Data may only be transmitted to datamanagers, contractual employees orusers of data who have a registeredseat or are registered in non-EUcountries or non-EEA countries, if thesupervisory body of the Republic ofSlovenia issues a decision that thereceiving state guarantees a sufficientlevel of data protection. Such decision isnot required for transmission to a statecontained on the list of countriesrecognized as having sufficient levels ofdata protection. If a sufficient level ofprotection in relation to the datatransmitted and the purpose oftransmission is established, data may betransmitted to countries that onlypartially assure a sufficient level ofprotection without first obtaining adecision by the supervisory body of theRepublic of Slovenia.


181

Spain1. IntroductionThe Spanish Constitution recognisescertain basic labour-related rights, suchas the right to work, the right to strikeand the right to join a Trade Union.More detailed regulation is contained inthe Workers Statute, which establishes anumber of mandatory and minimumterms and conditions of employment.The employment relationship may befurther regulated at a number of levels.Collective Bargaining Agreements(“CBAs”) mandatorily regulate specificemployment terms and conditions ofthose employees that come within thescope of each specific CBA. CBAs maybe drawn up at different levels by meansof collective negotiation (by sector –such as metal, offices, chemicals etc –or by company) and with differentterritorial scopes of application (national,Autonomous Community, provincial).CBAs are temporary agreements, theduration of which is agreed between theparties. In addition, individual contractsmay contain specific terms andconditions agreed with a particularemployee.


2.1 GeneralSpanish law draws a distinction between“Senior Executive” staff and ordinary orstandard staff.

2.2 DirectorsThe employment relationship of SeniorExecutive employees is governed by thespecific rules of Royal Decree1382/1985. Their contracts ofemployment are subject to fewerconstraints than standard employeeswhose employment relationship islargely governed by the Workers’Statute.

The concept of “Senior Executive” isnarrowly defined and includes only:“those employees who genuinelyexercise broad powers inherent to thecompany’s legal ownership and relatedto the company’s general objectives,limited only by the direct instructionsissued by the company’s managingbody”.

When determining whether anemployment relationship should beclassified as “standard” or that of a“Senior Executive” in the context of amultinational group of companies, if theindividual does not receive directinstructions from the Board of theSpanish company but from a personwho is responsible at an internationallevel for the group or board of directorswithin the group (without the employeehaving significant autonomy in theperformance of his services), theemployee may be classified as astandard employee rather than a SeniorExecutive.

In some cases, case law has stated thatindividuals who render their services asSenior Executives and aresimultaneously active members of thecompany’s Board have a mercantile,and not an employment, relationshipwith the company.

3. Hiring3.1 RecruitmentIn principle, the employer may recruitemployees freely. For this purpose, theemployer may resort to publicemployment services, recruitmentagencies, placement agencies andtemporary employment agencies. Whenan employer recruits via a temporaryagency, the relationship is governed byspecific rules contained in Law 14/1994and Royal Decree 4/1995.

Generally speaking, employers arelegally required to register the content ofany employment contracts, and anyamendments thereto or extensions, withthe relevant Employment Office(“Servicio Público de Empleo”) within tenworking days of the execution date.In addition, employers must registeremployees with the Social Securitysystem before their employmentcontracts can commence.

Companies with more than 50employees must recruit two per cent oftheir workforce from those personsregistered as disabled. Employers mayreceive social security or tax benefits forrecruiting disabled employees.

Employers may benefit from rebates ofsocial security contributions if they hire,

for an indefinite period, employees fromspecific groups (for example,unemployed women in specific jobs orprofessions, unemployed people over45 years of age, etc.).

3.2 Work PermitsAs a general rule, non-EEA nationalsmust obtain a work permit beforecommencing employment. Various typesof work permits may be granteddepending on the nature and duration ofthe work involved. Whether or not awork permit will be issued may depend,among other things, on the currentnational employment situation.

Pursuant to Royal Decree 178/2003nationals of the European Union or ofEEA Member States, either employeesor self-employed, may reside and workin Spain without a residence or workpermit, as may the members of theirfamily. In order to carry out activities asemployees or in a self-employedcapacity, the interested parties aresubject to the same regulations asSpanish citizens.

The Government has approved amoratorium of two years (with effectfrom 1 January 2007) during which thenationals of Romanía and Bulgaria willstill be required to obtain a work permitprior to commencing employment.

4. DiscriminationThe Workers’ Statute prohibitsdiscrimination on the grounds of sex,marital status, age, race, social status,religious/political ideology, sexualorientation, trade union membership,kinship with other employees orlanguage, in relation to recruitment andemployment conditions. It also prohibitsdiscrimination on the grounds ofphysical or mental handicap andprovides special protection in maternitycases.

New legislation on discrimination(Organic Law 3/2007 of Equalitybetween Men and Women) has recentlybeen passed, which may have asignificant impact on Spanishcompanies. This legislation requiresevery company to adopt measures inorder to avoid discrimination betweenmen and women. Furthermore, an

Employment and Benefits in the European UnionSpain


182


“Equality Plan” including (i) specificequality objectives, (ii) specific strategiesand policies to achieve these objectives,and (iii) evaluation and monitoringsystems must be developed in certaincircumstances (i.e. in companies withmore than 250 employees, whenstipulated by the applicable collectivebargaining agreement, etc.).


5.1 Freedom of ContractThe parties are free to agree on anyterms to the extent permitted by law.

5.2 Form of ContractCertain types of employment contractsmust be executed in writing in aprescribed format (e.g. internshipcontracts, fixed-term contracts with aterm of over four weeks, part-timecontracts etc). The main classificationsof contracts are set out below:

(a) Indefinite employment contracts,which may generally be agreedeither verbally or in writing.

(b) Fixed-term employment contracts,these can be:

■ Contingent contracts – based onproduction needs or marketdemands, these contracts mustset out in detail thecircumstances in which theyoperate. They must be agreed inwriting if the term exceeds fourweeks.

■ Interim contracts – to providetemporary cover for anotheremployee. These contracts mustbe agreed in writing.

■ Contracts for a specific work orservice – These must be agreedin writing.

■ Internship contracts – Thesemust be agreed in writing.

There are other specific categories ofemployment contracts such as part-timecontracts (either of fixed or indefiniteduration), relief contracts (an employeesubstitutes another employee who haspartially retired), or temporary contracts

for disabled persons (from one to threeyears’ duration). These must all beagreed in writing.

The employment of Senior Executivestaff is governed by Royal Decree1382/1985; this contains more flexibleprovisions than general Labour Law,particularly in relation to termination andseverance arrangements. SeniorExecutives are not generally governedby CBAs unless express agreement isreached with the employer.

The parties are accordingly free to agreespecific severance terms. If no prioragreement on severance terms hasbeen reached, dismissal packages oftwenty days’ salary per year of service(up to a maximum of twelve months’salary) are payable. An employer canalso terminate the contract “at will” andwaive the contract on the grounds of“loss of trust” upon giving notice of threeto six months (or making a payment inlieu), and compensation of seven days’salary per year of service (up to amaximum of six months’ salary) ispayable, unless a different amount isagreed by the parties. In practice,contracts for Senior Executives ofteninclude “golden parachute clauses”which provide detailed and substantialseverance packages, as well as otherrelated terms.

5.3 Trial PeriodsIf a trial period is agreed, it must berecorded in writing before theemployment starts. During the trialperiod, either party may unilaterallyterminate the contract without having tojustify the grounds. In thesecircumstances, the employee is notentitled to receive a notice or aseverance payment upon thetermination of the employmentrelationship.

Trial periods may not exceed the termestablished in the applicable CBA(the Workers’ Statute provides for ageneral term of six months for qualifiedtechnicians or two months for otheremployees). Employment contracts forSenior Executives may incorporate a trialperiod not exceeding nine months.

5.4 Confidentiality and RestrictiveCovenants

Any information related to the employer’sbusiness must be kept confidential, bothduring and after employment. This dutyof confidentiality is inherent to the legalnature of the employment relationship forboth standard employees and SeniorExecutives, and there is no need for theemployer to provide any compensationfor it.

An employee may not provide servicesto several employers during the term ofthe contract if this would give rise tounfair competition, or if an exclusivitycovenant has been given by theemployee. The exclusivity covenantmust be in writing, and the employee isentitled to be specifically remuneratedfor the covenant, except in the case ofSenior Executives. The exclusivitycovenant may be terminated at any timeat the employee’s discretion, by servingthe employer with 30 days’ writtennotice, thereby disentitling the employeeto any further compensation forexclusivity.

Post-termination non-competitioncovenants may also be agreed at anygiven time, provided that:

■ The employer has an effectiveindustrial or commercial interest inrelation to its enforcement, and,

■ The employee is paid adequateeconomic compensation.

In any event, such post-termination non-competition covenants may not exceedtwo years for technicians and sixmonths for other employees.

When the employee has attendedprofessional specialisation courses orreceived training at the employer’sexpense, a “retention” covenant may beagreed in writing, by virtue of which theemployee shall remain with the companyfor a specific term not exceeding twoyears. If the employee leaves thecompany before the end of the term, theemployer will be entitled to claimdamages. The damages are normally ata level equal to the value of the coursestaken in order to acquire thespecialisation in question.


183

5.5 Intellectual PropertyThe transfer to the employer ofintellectual property rights in workscreated by virtue of an employmentrelationship are governed by thecontract. In the absence of any expressprovision, it is assumed that theintellectual property rights have beenexclusively assigned to the extentrequired by the employer to carry out itsusual activities.

6. Pay and Benefits6.1 Basic PayThe structure of the salary is usuallyestablished by the CBA or detailed inthe employment contract, with adistinction being drawn between thebase salary and any additionalallowances. Additional supplements arepayable in certain circumstancesspecified by the relevant CBA or in theemployment contract (for examplehazardous work, night shifts etc).

Employees are also entitled to at leasttwo extraordinary payments per year;one payment to be made at Christmasand the other generally paid before thesummer holidays. The CBA may,however, provide that the extraordinarypayments be paid on a pro rata basisover 12 months.

The Government annually adjusts theminimum wage, taking into account,amongst other criteria, the ConsumerPrice Index. The amounts establishedare a minimum wage and may beincreased by CBAs or in individualemployment contracts between theworker and the employer.

The CBAs establish the minimum salaryreviews to be made on an annual basisand which are usually linked to theincrease in the Official Consumer PriceIndex, although the employer may applyhigher increases.

6.2 Private PensionsThe promoter of an “employmentsystem” pension plan will be any entity,company or business whose employeesare participants in the pension plan.These plans are financed bycontributions from the promoters and,where applicable, by contributions fromthe participants. These pension

schemes are funded through a vehiclewhich is separate from the promoter.

6.3 Incentive SchemesMany companies have incentivesschemes. Usually these incentivesschemes comprise variableremuneration linked to performance orsales; or share option schemes.Generally only managers and/or qualifiedemployees (i.e. sales representatives)benefit from these kinds of schemes.

Stock option plans may be used as anincentive for productivity and the retentionof employees or Senior Executives withinthe company. In principle, and as ageneral rule, the benefits provided toemployees under a stock option plan willbe classified as remuneration in kind fortax and Social Security purposes (theremay, however, be tax exemptions incertain circumstances and subject tospecific limits).

Case law has established that, in certaincircumstances, the benefits provided toemployees under a stock option planwill be classified as salary for thepurposes of calculating severancepayments.

6.4 Fringe BenefitsFringe benefits can be voluntarilygranted by companies or stipulated inthe applicable Collective BargainingAgreement.

Each company has a completelydifferent policy as regards fringe benefits(i.e. some companies have no fringebenefits or have them only for managersand other companies have a series ofdifferent fringe benefits offered to all oftheir employees). Generally fringebenefits are provided to managers.However, under some CollectiveBargaining Agreements fringe benefits(i.e. insurance policies, meal/transportation allowances, etc.) areprovided to all the employees.

7. Social Security7.1 CoverageProvided that specific requirements aremet, the Spanish Social Security Systemoffers a wide range of benefits, includingmedical care, benefits for dependentchildren, death and survivors,

unemployment allowances, retirementpensions, temporary or permanentdisability grants and maternity/paternitybenefits.

The Spanish Social Security System ismade up of a General Regime, aRegime for employees assimilated to theGeneral Regime (applicable to Directorsthat also perform management taskswhile paid by the Company) and severalspecial regimes applicable to, forexample, the self-employed orhousehold workers.

7.2 ContributionsUnder the General Regime, both theemployer and employee are required tomake contributions.

The standard contribution rates are30.15 percent for employees with anindefinite contract, plus the contributionfor occupational accidents and illnesses(which ranges from one percent to8.50 per cent depending on the type ofactivity carried out) for the employer, and6.35 percent for the employee.The contribution rates are applied overthe corresponding contribution base.The contribution base for 2007 hasbeen set at a maximum monthly amountof Euro 2,996.10 that serves as a cap.The employee’s Social Security must bedirectly deducted by the employer fromthe employee’s salary. In addition, theemployer must make monthly paymentsto the Social Security Treasury for thecorresponding employees’ andemployer’s contributions.

8. Hours of WorkThe duration of the annual working timeis agreed in the CBA or employmentcontracts. The maximum duration of theordinary annual working time will be anaverage of 40 hours per week over thecourse of a year. Through a CBA or anagreement between the company andthe employees’ legal representatives, theworking time may be irregularlydistributed over the year, provided thatthe legal minimum rest periods are stillcomplied with.

In this respect, there must be aminimum of 12 hours between the endof a working day and the following one.In addition, employees are entitled to



184


enjoy a minimum weekly uninterruptedrest period of one and a half days,which can be accumulated over14 days, so it is possible for anemployee to work for 11 days and thenrest for three days.

Hours worked in excess of the ordinaryannual working time are classified asovertime, which may not exceed80 hours per year. Overtime shall beremunerated according to the ratesagreed in the applicable CBA or theemployment contract (and this may notbe lower than the established hourlyrate) or offset with equivalent restperiods within the four months followingthe performance of overtime.

9. Holidays and Time Off9.1 HolidaysThe annual holiday period is agreed inthe applicable CBA or employmentagreement and may not be less than30 calendar days. It is not permissible topay employees in lieu of their holidayentitlement, except on the termination ofthe contract. Unused holidays may notbe carried forward to the next year. Inaddition, the employees are entitled to14 public holidays annually.

9.2 Family LeavePaid leave must be allowed in certainfamily-related circumstances (e.g.15 days for marriage or two days for thedeath of a close relative). The parents orlegal guardians of children under eight,handicapped/dependant relatives havethe right to a reduction of up to half ofthe working day, with a pro-rata salaryreduction. Workers are entitled to a onehour absence in their daily working time(without loss of salary) for nursing a childof under nine months (or this may beaccumulated and taken as rest daysafter the end of the maternity leave).

During maternity leave, the contract issuspended for 16 weeks (plus two extraweeks per each child if more than onechild is born). This right to maternityleave may be enjoyed by the child’smother or father, although during the sixweeks following the birth leave may onlybe taken by the child’s mother and,thereafter, both parents may takematernity leave either simultaneously orsuccessively, provided that no more

than 16 weeks’ leave is taken in totalbetween the parents.

During paternity leave, the contract issuspended for 13 days (plus two extradays per each child if more than onechild is born). This period will beincreased up to four weeks in the nextsix years.

Social Security benefits are not indexedto an employee’s actual salary but tospecified contribution bases (subject tominimum and maximum amounts).The Social Security System pays 100 percent of the employee’s Social Securityreference contribution base while theemployee is enjoying maternity leave.

9.3 IllnessGeneral legislation states that in thecase of temporary incapacity caused bycommon illness or non-occupationalaccidents, employees are not entitled toreceive their salary for the first threedays following the temporary incapacity.Between days four and 20, employeesare entitled to receive 60 per cent of thereference contribution base (from the 4thto the 15th day sick pay is paid by theemployer and from the 16th to the 20thday by the Social Security System).Finally, from day 21 onwards, they areentitled to receive 75 per cent of theirreference contribution base (paid by theSocial Security System).

In the event of occupational illness andaccidents, employees are entitled toreceive 75 per cent of the referencecontribution base from the date onwhich the temporary incapacity begins(paid by the Social Security System).

CBAs often improve these percentages,for example by requiring the employer topay the difference between the SocialSecurity allowance and the real salary orimposing an obligation on the employerto assume payment during the first threedays of incapacity.

Social Security benefits resulting fromtemporary incapacity are paid for amaximum of 18 months.

10. Health and Safety10.1 AccidentsRegulations on the prevention of

occupational hazards are extremelydetailed in Spain, requiring multiplemeasures to be taken and obligations tobe implemented by the companies.

In the event of a breach of health andsafety duties, employers are subject todifferent administrative sanctionsdepending on the seriousness of thebreach. In addition, infringing employersbear a surcharge of between 30-50 percent of the corresponding SocialSecurity allowance granted to theemployee that has suffered anoccupational illness or accident at work,depending on the nature and the extentof the breach. This surcharge cannot beinsured against, and any agreement orcontract which is executed in order tocover, compensate or transfer thissurcharge is legally null and void.

10.2 Health and Safety ConsultationThe monitoring of health and safetyregulations is carried out both externallyand internally. Externally, the LabourInspection and other public bodies are incharge of these matters. Internally,employers, Prevention Services, theHealth and Safety service provider or theHealth and Safety Committees areinvolved with the prevention ofoccupational risks (notwithstanding theemploying company’s ultimateresponsibility).

The Health and Safety Committees arejoint membership bodies in charge ofregularly and periodically advising thecompany on matters related to riskprevention. They are set up incompanies or workplaces which have atleast 50 employees and consist of anequal number of employee andemployer representatives.

11. Industrial Relations11.1 Trade UnionsLaw 11/1985 on Trade Union Freedomgoverns the right of all workers to freelyjoin a Trade Union and gives broadpowers to Trade Unions to exercise theirrights. Indeed, large Trade Unions inSpain such as the Workers’ Commission(“Comisiones Obreras” or “CCOO”) andthe General Workers’ Union (“UniónGeneral de Trabajadores” or “UGT”)have considerable political power. Thereare also employer associations, which


185

seek to develop labour relations inconjunction with the Trade Unions andthe labour authorities by means ofcollective agreements, lobbying and soon.

11.2 Trade DisputesThe right to strike is protected by theSpanish Constitution. Any strike actionmust be expressly adopted by a majorityof employees in each Company andmust be notified to the employer and tothe Labour Authorities by theemployees’ legal representatives.This notice must be given at least fiveworking days prior to thecommencement of the strike, or10 working days if the strike affectspublic service companies.

While an employee is exercising the rightto strike, the employment contract issuspended. This relieves both employerand employee of their obligation toprovide remuneration and servicesrespectively. The dismissal of anindividual whose employment contract issuspended as a result of exercising theright to strike will be void, unless thestrike is declared illegal or the employeedoes not comply with the minimumservice requirements provided in the lawor relevant CBA.


As well as participation through unionrecognition, information, consultationand participation of employees at acompany level is provided through theemployees’ legal representatives (staffdelegates in workplaces with less than50 employees or Works Councils inworkplaces with at least 50 employees).The number of employees on a WorksCouncil will depend on the size of theworkplace. Work Councils and staffrepresentatives are entitled to receiveinformation (e.g. details of seriousdisciplinary actions against employeesetc), to publish leaflets in relation toemployment or social matters and maycollectively negotiate in certaincircumstances.

Employers must consult the WorkCouncil before adopting certainimportant decisions, such as thoserelating to the reorganisation of the

workforce, the closure of a plant ortraining programmes.

A Spanish company must establish aEuropean Works Council, or a similarvehicle which provides information andconsultation to/with employees, if:

■ it employs a total of more than1,000 people in all EuropeanMember States, of whom 150 workin one particular Member State andanother 150 in a different MemberState; and,

■ this is requested by at least100 workers or their representatives,belonging to two workplaces orcompanies located in differentMember States.

Prior to the establishment of a EuropeanCompany in Spain, specific proceduresmust be followed and rights toinformation, consultation and/orparticipation agreed between thecompany representatives and theemployees’ legal representatives.

12. Acquisition andMergers

12.1 GeneralArticle 44 of the Workers’ Statuteimplements the “Acquired RightsDirective” in Spain. In the event of atransfer of an undertaking, the affectedemployees are entitled and obliged totransfer, under their existing employmentterms and conditions, to the transfereewho automatically becomes their newemployer.

The transferor and transferee are jointlyand severally liable for a three-yearperiod for any employment obligationsoutstanding at the time of the transferand for a four-year period in relation tosocial security obligations arising prior tothe transfer.

If there are no labour or social securityobligations outstanding at the time ofthe transfer, any future obligations areassumed exclusively by the newemployer (unless the transfer is classifiedas a fraud, in which case the formeremployer would also be liable).

12.2 Information and Consultationrequirements

The transferor and transferee shouldserve notice of the transfer to the legalrepresentatives of the affectedemployees. In the absence of any legalrepresentatives, each affected employeeshould be individually informed.The information to be provided is: (a) theproposed date of the transfer, (b) thereasons for the transfer, (c) the legal,economic and employmentconsequences of the transfer for theemployees, and (d) details of theproposed measures in relation to theemployees.

The information must be provided inadvance of the transfer and before theemployees’ employment conditions areaffected by the transfer. In the event ofcompany mergers and demergers, theinformation must be provided no laterthan the date that the notice conveningthe general meeting of the company toadopt the relevant resolutions is served.

Where specific employment measuresare contemplated as a consequence ofa transfer, the employer(s) of theaffected employees must commence aconsultation process with theemployees’ legal representatives inrelation to the proposed measures andtheir consequences for the employees.In the absence of any legalrepresentatives, the consultation shouldbe carried out with affected individuals.This consultation must take placesufficiently in advance of theimplementation of the measures for agenuine consultation to take place.

Where any measures relate to asubstantial modification of terms andconditions of employment, relocation orcollective dismissals, detailedinformation and consultation rights andprocedures will apply.

In the event of a merger or change inthe employer’s legal status that mayaffect the level of employment, the legalrepresentatives of the employees areentitled to issue a report, prior to themerger provided they do so within15 days of being informed of themerger/change in status.



186


12.3 Notification of AuthoritiesThere is no obligation from anemployment law perspective to notifythe authorities in the event of thetransfer of an undertaking. However thesocial security authorities must benotified of the transfer and the affectedemployees.

12.4 LiabilitiesIn strict legal terms, in relation to thetransfer of an undertaking, if theemployer does not comply with itsinformation and consultation obligations,it will not affect the validity of thetransfer, however, it could give rise to afine of up to Euro 3,006 from the LabourAuthorities.

13. Termination13.1 Individual TerminationEmployment contracts may only belawfully terminated on a number ofgrounds expressly stipulated by law andin accordance with the appropriateprocedures for each case.

Contracts may be terminated at therequest of the employee or employer bymutual consent, upon the expiry of anagreed term or the conclusion of the jobor service covered by a temporarycontract, or due to the retirement of theemployee.

Upon the termination of a temporarycontract, employees are entitled to acompensation equivalent to eight days’salary per year of service.

13.2 Notice/Reasons for DismissalThe employment contract may beterminated by the employer by means ofa disciplinary dismissal based on aserious and wrongful breach of thecontract by the employee, without thelatter having any right to compensation.Legislation and CBAs list the contractualbreaches which may be considered forsuch purposes (lack of discipline ordisobedience, offences, breach ofcontractual good faith etc).The employee must be served withwritten notice of the dismissal, indicatingthe events on which it is based and thedate it is to take effect.

The employee is entitled to oppose thedismissal by means of filing a claim

within 20 working days of the dismissaldate before a special administrativebody where a preliminary conciliationmeeting is required. This stage can beavoided if, within 48 hours of thedismissal the employer offers legalcompensation to the employee for unfairdismissal and this is accepted by theemployee. If the employee fails toaccept, the employer may file a writbefore the Labour Court acknowledgingthe dismissal as unfair and deposit theproposed compensation at the LabourCourt. This deposit procedure avoidsthe employer having to pay “processingsalaries” (i.e. salaries corresponding tothe period between the date of thedismissal and the date of the conciliationor notification of the Court’s decision). Inpractice, the deposit can also be madeafter the 48-hour period up to the dateof the conciliation meeting, in whichcase the processing salaries payablewould be limited to the period betweenthe dismissal date and the date ofdeposit.

However, if the employer does not followthe deposit procedure, or if despitedoing so, the employee still claims thatthe severance payment deposited isincorrectly calculated, or that thedismissal is null and void, he/she canrequest a conciliation meeting. If noagreement can be reached at thismeeting, then the employee may file aclaim before the Labour Courts (within20 days of the dismissal date), whichwould resolve the dispute by classifyingthe dismissal as fair, unfair or void. Therelevant legal procedures can takearound three to four months and anappeal is possible before a HigherCourt.

If the dismissal is considered unfair, theemployer may, in most cases, chooseeither to reinstate the employee or toterminate the contract with a severancepayment of 45 days of salary per year ofservice with a maximum of 42 monthlypayments (plus the “processingsalaries”, unless the severance paymentwas correctly deposited in due form andamount as outlined above).

In addition, an employment contractmay be terminated on “objectivegrounds” such as the employee’s

ineptitude, employee absenteeism (whenit reaches certain levels as establishedby law), or when there are economic,technological, organisational orproduction-related grounds affecting anumber of jobs below the “collectivedismissal” threshold number.The objective dismissal is subject to anumber of legal requirements; first,written notice must be served to theemployee explaining in detail thegrounds for the decision; secondly, theemployer must make a simultaneousoffer to pay the minimum severancecompensation equal to 20 days’ pay peryear of service (up to a maximum of12 months’ pay); and thirdly, theemployee is entitled to 30 days’ noticeor a payment in lieu of notice.

The employee may appeal the decisionto dismiss as if it were a disciplinarydismissal and, likewise, the decisionmay be classified by the Judge as fair,unfair or void with similar consequences.

13.3 Special ProtectionThe dismissal will be considered void if itwas discriminatory or if it violated theemployee’s fundamental rights or publicfreedom. In such circumstances, theemployer must reinstate the employeeand pay all salary accrued during thedismissal period.

13.4 Closures and Collective DismissalsThe Collective Dismissal procedure is aspecial administrative procedure thatshould be followed when a companyexpects to terminate a minimum numberof contracts in a 90-day period inaccordance with the followingthresholds:

■ 10 employees in a company whichhas less than 100 employees;

■ 10 per cent of the total workforce ina company with between 100 and300 employees; and

■ 30 employees in a company with300 or more employees.

Dismissals which affect the entire staffare classified as collective dismissals ifthe headcount is more than fiveemployees.


187

Under this procedure, the employingentity must obtain approval from therelevant Labour Authorities prior toimplementation of the dismissals. Itrequires evidence of “economic,technological, organisational orproduction-related” grounds for suchdismissal, which should be discussedwith the employees’ representativesduring a mandatory consultation periodof at least 30 days (or 15 days in thecase of companies with less than50 employees).

If the employer’s proposal is approved,the employees are legally entitled to aminimum severance payment of20 days’ salary per year of service (up toa maximum of 12 months’ pay),although, in practice, this severancepayment is significantly increased as aresult of the negotiations with theemployees’ representatives, in order toobtain an agreement with them.

If no agreement can be reached with theaffected employees, the LabourAuthorities will analyse the company’ssituation. If approval is not forthcoming,the employer cannot dismiss itsemployees.

14. Data Protection14.1 Employment RecordsThe processing of personal data inSpain, including the collection, storageand use of information held byemployers about their employees andworkers (prospective, current and past)is governed mainly by the Organic Law15/1999 dated 13 December 1999 (“theLPDCP”), which implements the EUData Protection Directive.

Employers, as data controllers, areunder an obligation to ensure that theyprocess personal data about theiremployees (whether held on manual filesor on computer) in accordance withspecified principals including thefollowing: a requirement to ensure thatdata is accurate, up to date, and is notkept longer than is necessary; and arequirement that it is stored securely toavoid unlawful access or accidentaldestruction or damage to it.

Under the LPDCP, prior to the creationof a personal data file, employers (asdata controllers) must notify the DataProtection Agency of the creation ofevery file, by filing a standard form.The notification must contain details ofthe data controller’s (corporate) identity,the purpose of the file, its location,security measures taken, the dataintended for inclusion in the file, anddetails of foreseeable disclosures andinternational data flows.

In addition, personal data may only beprocessed if the employee hasunambiguously given his or her consent,unless there is an applicable lawfulexception. Finally, employers mustcomply with certain duties to provide theemployees with specified informationabout the data processing.This information must be providedbefore the personal data is collectedand before the consent of the employeehas been granted.

Infringement of the data protection lawcan lead to fines of between c601.01and c601,012.10.

14.2 Employee Access to DataData subjects have the right to accesstheir personal data, to rectify such data,to delete their personal data containedin a data file, and to object to the dataprocessing of their personal data.

Employees, as data subjects, areentitled to request and obtaininformation from a data controller abouttheir personal data included in files.Within one month of such a request, thedata controller must decide whether thedata subject has a right of access, and ifno response is provided within onemonth, the request is deemed to havebeen refused. If the request is granted,the data subject should exercise theright within ten days. This may involvemerely consulting the files by visualexamination, or the provision of relevantdata in writing, by fax or photocopy in alegible and understandable form.The data subject may select the meansby which the right of access isexercised, subject only to the limitationthat the means chosen must be inaccordance with the data controller’smethod of storage.

The information provided must includenot only the data, but also the results ofany decisions or processing made withthe data, the source of the data, thirdparties to whom the data have beendisclosed, and a statement of the usesand purposes for which the data werestored.

The only statutory grounds on whichaccess may be refused are that therequest for access was made bysomeone other than the data subject, orthat the data subject has exercised theright of access within the previous12 months and there are no reasonablegrounds for exercising it again. In suchcases, the data subject has the burdenof proving the reasonableness of hisrequest.

Data subjects are also entitled torequest from the Data ProtectionRegistry information relating to theexistence of personal data processing,the processing purposes, and theidentity of the data controller. TheRegistry is available for publicconsultation, without charge.

14.3 MonitoringNo specific legislation has been enactedto regulate the monitoring of employeecommunications such as e-mail, Internetand telephone usage. However, theLabour Courts have considered theconflict between the employer’s rights toeffective management control and theright of employees to personal privacyand secrecy of communications.

From case law, it can be inferred thatemployers may monitor employeecommunications in the circumstancesset out below. Note that theseguidelines are a matter of interpretationof the relevant case law, and have notbeen promulgated by any regulatoryauthority:

(a) The monitoring must be justified,suitable to achieve the company’saim, necessary (i.e. a more moderatealternative of achieving the sameobjective does not exist) andbalanced.

(b) The company should communicateto its employees that access to



188


e-mail or the Internet has beengranted exclusively for professionalpurposes, and that the company hasin place a procedure for monitoringe-mails sent and records of Internetaccess. Employees can be advisedof such practices via internal codessetting out professional standards orinternal guides to the company, tobe signed by each employee, or byinclusion of a statement in the termsof the employment contract, or bydrafting a specific document to besigned by every employee of thecompany in which they express theiragreement with the policy andconsent to the monitoring activity.

(c) Employees should be required toadvise third parties of the monitoringactivity carried out by the employer inconnection with e-mails received.A reference to such monitoring activityshould also be automatically includedin e-mails sent by employees.


An employer who wishes to provideemployee data to third parties must doso in accordance with the LPDCPprinciples and processing conditions.In many cases it may be necessary toobtain express consent to suchdisclosure in the absence of a legitimatebusiness purpose for the disclosure anddepending on the nature of theinformation in question and the locationof the third party.

Under the LPDCP, disclosures ofemployees’ personal data for thepurpose of requiring them to fulfil theirobligations, or to allow employers to fulfiltheirs, are in principle permitted withoutthe separate consent of the employees.Note, however, that because datarelating to an employee’s Trade Unionmembership is sensitive data, thedisclosure of such data always requiresthe prior consent of the employee.

Where the third party is based outsidethe EEA it should be noted that theLPDCP prohibits the transfer of data toa country outside the EEA unless thatcountry ensures an adequate level ofprotection for personal data or one of aseries of limited exceptions apply.

In the context of commercialtransactions where employee data isrequested, care must be taken tocomply with the LPDCP. Where possibleanonymised data should be provided,where this is not possible the recipientshould be required to undertake inwriting that it will only use it in respect ofthe transaction in question, will keep itsecure and will return or destroy it at theend of the exercise.


189

Sweden1. IntroductionWhilst statutory regulation of theSwedish labour market has increased,labour law in Sweden has for some timebeen highly regulated under a system ofcollective bargaining. In practice, termsand conditions of employment as wellas the nature of labour/managementrelations are to a large extent mouldedby collective bargaining.

A high percentage of employees belongto trade unions. There are three centraltrade union confederations: the firstrepresents blue-collar workers; thesecond represents white-collar workers;and the third represents professional(graduate) employees. In addition,membership of employers’ organisationsby employers is common. The Swedishemployers’ federation exercisesconsiderable influence over its members.Collective bargaining is focused nationallywith agreements being negotiatedcentrally by trade unions. Labour law inSweden protects this bargaining processby providing certain “positive rights”including the right to strike, the right to bea member of a trade union and the rightof a trade union to consultations.

Collective agreements are legallyenforceable. An employee’s relationshipwith his employer is regulated by acombination of statutory provisions,collective agreement (if any) andindividual contract. Indeed, employerswho are not represented by anemployers’ body still tend to follow theindustry-standard agreements.

Disputes are handled by the DistrictCourts and the Labour Court. Decisionsof the District Courts can be appealed tothe Labour Court. The Labour Courtcomprises representatives of the judiciary,employers’ organisations and tradeunions. Decisions of the Labour Court arefinal and binding. In some cases disputesare handled directly by the Labour Court,from which there is no right of appeal.


2.1 GeneralThe Swedish system of collective

bargaining recognises various categoriesof employees. Generally, the employeescan be divided into two main categories;white-collar employees and blue-collaremployees. As stated above, suchcategories are traditionally representedby different trade unions and are, thus,covered by different collectiveagreements.

2.2 Senior Executives and DirectorsExecutives and employees withcomparable positions comprise aseparate specific category, as they areexempted from the application of theprincipal piece of employment legislation,the Employment Protection Act(Sw: lagen om anställningsskydd). As ageneral rule, the managing director of alimited liability company is covered bythis exemption, as well as seniormanagement in larger companies.However, the actual duties and terms ofemployment have to be considered ineach specific case in order to determinethe scope of this exception. Themanaging director and the seniormanagement are normally also excludedfrom the scope of collective agreements.Instead, the employment of seniorexecutives is normally regulated bycontract and disputes between employerand senior executives are often resolvedthrough arbitration. However, seniorexecutives and directors can berepresented by trade unions.

2.3 OtherGenerally, there are no special rulesapplying to the employment of part-timeemployees. However, a part-timeemployee may under certaincircumstances have a right to increasehis or her working hours. Discriminationagainst part-time workers is alsoprohibited (see section 4 below).

3. Hiring3.1 RecruitmentAs a general principle, an employer isfree to choose who to employ. Thereare, however, some limitations of whichthe most important is the prohibition todiscriminate on the grounds of gender,race, colour, national or ethnic origin,religious faith, sexual preferences,disability or trade union activities.Such discrimination is generallyprohibited in the Swedish labour market.

Employees previously made redundantenjoy a preferential right to re-employment in the business where theywere employed if their length of servicetotals more than twelve months over thepreceding three years. This preferentialright applies from the time notice isgiven up to nine months after the actualtermination of the employment.This means that an employer may notengage new employees within ninemonths of making employees redundantwithout observing the redundantemployees’ preferential right. Thepreferential right to re-employment willonly apply if the redundant employeerequests re-employment and hepossesses the necessary skills for thevacancy.

It should also be noted that theauthorities, as a labour market measure,can indirectly influence who is employed(normally elderly and disabledemployees or an under-representedgender group) by making specificquotas a condition of the grant ofregional aid or other subsidies.

An employer is also normally obliged toinitiate consultations with the tradeunion(s) to which he is bound bycollective agreement before employing amanager.

3.2 Work PermitsNordic and other EEA nationals areentitled to stay and work in Swedenwithout restriction. Should the stayexceed three months, however, suchpersons must register with the MigrationBoard.

Non-EEA nationals must, before comingto Sweden to work, obtain a residencepermit and a work permit. Permits areissued for specified periods andextensions can be applied for.Applications for such permits are madeat a Swedish embassy or consulate.The permit must have been grantedbefore arrival in Sweden. In addition,nationals in the majority of countriesoutside the EU need a visa to enterSweden.

Swedish citizens, aliens already living inSweden and citizens of EU and EEAmember states have a priority over

Employment and Benefits in the European UnionSweden


190


others in obtaining work in Sweden.Non-EU/non-EEA citizens may, however,be eligible for a work permit if there is atemporary shortage of labour or if theemployment has been obtained as partof an international exchangeprogramme. It is also possible to obtaina work permit for the purposes ofpermanent residence in Sweden, if, forexample, the applicant will hold a keyposition within trade and industry or ifthere is a demand for a certaineducational or professional experience.

Work permits are normally granted forone year at a time, or, if the employmentlasts for less than one year, for theperiod for which the employment isoffered. Work permits are granted for amaximum of 18 months (in total) if theemployment is due to a temporarylabour shortage. If the work is part of aninternational exchange programme orsimilar, the permit may be extended upto a total of four years. A work permit is,as a rule, restricted to the trade orprofession envisaged in the offer and tothe employer who made the offer.

Specialists, who are employed byinternational groups and who aretravelling to and from Sweden in thatcapacity in order to work on atemporary basis in Sweden, do notrequire a work permit. However, this onlyapplies if the total duration of the stay inSweden does not exceed 12 months.If the duration of the stay is longer thanthree months at a time, a residencepermit will be required and must begranted prior to the arrival in Sweden.

An employer employing someonewithout a permit or keeping in his servicesomeone who has had his permitwithdrawn or not extended can be fined.

4. DiscriminationDiscrimination on grounds of gender,race, colour, national or ethnic origin,religious faith, sexual preferences,disability, part-time employment andtrade union activities is generallyprohibited. This protection also appliesto applicants for work (see above).It should be noted, however, thatSweden has not yet implemented theEU directive 2000/78/EC in relation todiscrimination based on age.

If an employee is discriminated against byan employer, the employer may be heldliable to pay damages to the employeeand acts of discrimination can be declaredinvalid. The time limits for bringing claimsvary depending upon whether damages ora declaration is requested.

It is a criminal offence under the CriminalCode to discriminate on grounds ofrace, colour, nationality, sexualorientation or ethnic origin.

There are special, so called,ombudsmen whose functions are toensure compliance with the above.


5.1 Freedom of ContractThe negotiation of contractual terms at alocal level is relatively uncommon inSwedish labour practice, although it isincreasing. Typically, the terms ofemployment are governed by collectiveagreements signed at industry level.The employment of senior executivesand employees with specific functionsis, however, normally governed byindividually negotiated contracts.It should be noted that statutoryintervention provides a set of mandatoryrequirements relating to, for example,employment protection, parental leave,educational leave, health and safetyissues, hours of work and holidays.

5.2 FormThere is no legal requirement thatemployment contracts must be inwriting. It is customary, however, forcollective agreements to require theemployment contract to be in writingand to contain particular terms.Furthermore, in compliance with EUDirective 91/533, an employer mustinform a new employee in writing of theconditions applicable to the contract.

There are several collective agreementscontaining employment conditions whichcannot be reduced or exceeded. Thepurpose, amongst others, is to ensurethat the parties retain control of payrates. For example, if an employer payswages which are too high he may beliable to pay damages to the union forbreach of the applicable collectiveagreement.

5.3 Trial PeriodsContracts of employment in Sweden areregarded as being for an indefiniteperiod unless otherwise agreed.In certain specifically definedcircumstances, employment contractsmay be limited in time. Currently,Swedish law recognises approximatelyten different types of fixed-termemployment contract, these includefixed term contracts: for a specificproject or season, to provide temporarycover, to meet a temporary increase inworkload and for fixed-term employmentof up to 12 months (subject to a limit offive employees on such fixed termcontracts at the same workplace).In addition, an employee may (in certaincircumstances) be placed on probation,provided that this does not last morethan six months. The employer mustgive notice to terminate the relationshipbefore the end of the probationaryperiod. In default, the contract willbecome one for an indefinite period.Many collective agreements includeadjustments and supplements to theserules.

The new Swedish government, electedin September 2006, has howeverproposed new rules with regard to fixedterm employments, that are intended totake effect from 1 July 2007.These rules contain a new concept of socalled “free fixed term employment”(Sw: fri visstidsanställning), whichreplaces the majority of the currentcategories of fixed term employments.However, the ability to include a sixmonth probationary period at thebeginning of a permanent contract ofemployment will remain unchanged.

The new “free fixed term employment” isintended to be limited in time, in thesense that when the aggregate durationof an employee’s service during a five-year-period exceeds 24 months, thecontract will automatically transform intoan employment contract of indefiniteduration. There will be no limits on thenumber of employees that may beengaged on “agreed fixed-termemployment” contracts in the sameworkplace.


191


Under Swedish law, employees arebound by a general duty of loyaltyduring the term of the employment(including the notice period). This duty ofloyalty precludes an employee fromtaking any actions that may bedetrimental to the employer. In particular,the duty of loyalty imposes a duty not tocompete with the employer, as well as aduty of confidentiality in relation toinformation that could harm theemployer, should it become knownpublicly or by a third party.These obligations apply even though nonon-compete or confidentialityundertakings have been included in theindividual employment contract.A clarification of the duty of loyaltyduring the term of the employment isoften included in collective agreements.A breach of the duty of loyalty could, inserious cases, constitute grounds fordismissal and could give rise to anobligation on the employee to paydamages to the employer.

Upon termination of employment, theduty of loyalty ceases. Thus, the formeremployee may engage in a businessthat is competitive with the employerand make use of knowledge acquiredduring the employment (with theexception of company secrets which areprotected under the Swedish Protectionof Trade Secrets Act). In order toprevent an employee from competing ordisclosing confidential information,express post termination contractualrestrictions are required. Suchrestrictions must, however, be carefullyconsidered in the context of eachindividual case, as their validity is subjectto significant restrictions.

Pursuant to Section 38 of the SwedishContracts Act (Sw: avtalslagen), a non-compete clause is not enforceable tothe extent it is more far-reaching than isreasonable in the circumstances.Accordingly, a court of law could modifythe scope of the non-compete provisionor declare such a clause completelyunenforceable. In addition, if the non-compete clause is sanctioned bypenalty, such a sanction could beadjusted or declared invalid pursuant toSection 36 of the Swedish Contracts

Act. It should be noted that any penaltyimposed on the former employee forbreach of the non-compete obligationmust be proportionate to his formersalary from the employer. Liquidateddamages, in relation to a breach of anon-compete clause, may normally notto be in excess of a sum equivalent tosix months salary. However, this naturallypresupposes that the non-competeclause in itself is valid.

In order to determine whether a non-compete clause is reasonable, abalance must be struck between theemployer’s need for protection and theemployee’s freedom to work. The validityof a non-compete clause is subject tofurther regulation by a collectiveagreement entered into in December1969 between the principal players inthe labour market. The principles of thiscollective agreement (the “CollectiveAgreement of 1969”) now guide thegeneral legal considerations relating tonon-compete clauses even in relation toemployment relationships which are notformally covered by the CollectiveAgreement of 1969.

Specific provisions concerning loyalty,unfair competition and confidentiality areoften found in the contracts of seniorexecutives or employees with specificfunctions. However, it should be notedthat the Swedish courts apply arestrictive approach towards post-contractual non-competition clauses.

5.5 Intellectual PropertyThe starting point is that intellectualproperty created by an employee duringthe course of his or her employmentbelongs to the employee. However, asregards patentable inventions, theemployer has under certaincircumstances a statutory right to takeover such inventions and the employeeis entitled to “reasonablecompensation”. Disputes are tried in theordinary Courts, with issues concerningcompensation being tried by a specialboard.

With regard to intellectual property otherthan patentable inventions, the employeralso often, by way of agreement(express or implied), has a right tointellectual property created by the

employee. In addition, in compliancewith the European Directive91/250/EEC, where a computerprogram is created by an employee inthe execution of his duties, the employeris exclusively entitled to exercise allrights in the program so created unlessotherwise provided by contract.

6. Pay and Benefits6.1 Basic PayThere is no statutory minimum pay, butcollective agreements usually lay downrates of pay for the groups of employeesto which they apply. As already noted,collective agreements are legallyenforceable against an employer.Typically, companies not bound bycollective agreements neverthelessfollow wage rates set by an appropriatecollective agreement.

The prohibition against discriminationcan in some circumstances lead togovernmental control in respect ofwages.

Further, under the Contracts Act, anyterm of an agreement, including a wageclause, may in certain circumstances beset aside or modified by the courts ifdeemed unreasonable.

The method by which wages andsalaries are paid is not regulated bystatute, but again, collective agreementsusually provide for the timing andmethod of payment.

Pay is not usually index linked.

6.2 Private PensionsMost contracts of employment makeprovision for pension complementary tothe state pension scheme either througha collective agreement or by individualprovision in the contract itself. Pensionsare usually index linked.

6.3 Incentive SchemesProfit related pay schemes, profitsharing arrangements or bonusschemes exist, but usually only forsenior executives within the privatesector.

6.4 Fringe BenefitsBenefits such as a car, bonus,life/accident insurance and subsidised



192


canteen/luncheon vouchers may beprovided to employees.

6.5 DeductionsEmployers are obliged under Swedishtax law to make income tax deductionsbefore wages or salaries are paid. Inaddition, they must provide certaindetails in an itemised pay statementsetting out what deductions have beenmade. Other deductions can only bemade in specified circumstances or withthe consent of the employee.

Tax rates are approximately 31 per centon income up to SEK 316,700 (2007),51 per cent on income ranging fromSEK 316,700 to SEK 476,700 (2007)and 56 per cent on income over SEK476,700 (2007).

7. Social Security7.1 CoverageSocial security provision is made forinter alia sickness benefit, childcare,unemployment insurance, pensions,disability and industrial injury.

7.2 ContributionsEmployers are obliged by law to makecontributions in respect of theiremployees to the social security fund.Contributions at the rate of 32.42percent (2007) of an employee’s grosswage or salary and taxable benefits arepayable by the employer but are taxdeductible by the employer. Employeesare also required to make a minorcontribution, which is tax deductible bythe employee.

8. Hours of WorkThe General Hours of Work Act 1982regulates the hours of all employees.The working week is set at a maximumof 40 hours, but is flexible in respect ofwhen those hours are worked.Therefore, the number of hours workedover a period of four weeks can betaken together and averaged. The Actdoes not lay down any right for theemployee to overtime compensation.However, collective agreements and/orindividual employment contracts oftencontain provisions in this respect.Moreover, the total compensation to theemployee may not be unreasonably low.

There are three different categories of

working hours: “normal hours”, “on-callhours” (where the employee is requiredto stay at work to be able to work if theneed arises) and “duty hours” (where theemployee does not have to wait at thework place but must be available towork). Normal working hours and on-callhours are regulated by law, whilst dutyhours are regulated by collectiveagreement. Working weeks of less than40 hours are not unusual.

In addition, there are two categories ofovertime work – general and special.Employees are permitted to work amaximum of 48 hours general overtimeper four week period or 50 hours percalendar month, with an annual limit of200 hours general overtime per year,and any overtime in excess of this(referred to as special overtime) can onlybe worked if authorised under theprovisions of a collective agreement orby a permit obtained from the authoritiessubject, always, to the limits in theEuropean Directive 93/104. There arecertain exceptions in case of naturaldisasters and major accidents.

There is also provision for regulatingovertime worked by part-timeemployees, the hours of work of youngpersons and rest and interval periods.

Finally, as a general limitation, theaverage working time for each seven-day period may not exceed 48 hoursduring a period of four months.

9. Holidays and Time Off9.1 HolidaysEmployees are entitled by law to 25working days holiday per year.Saturdays are not counted as a workingday. The holiday year runs from 1 Aprilto 31 March the following year.Employees are permitted to accumulateholidays and to carry these over at therate of five days per holiday year, butthey must be used within a five yearperiod.

9.2 Family LeaveBoth parents are entitled to parentalbenefit. A female employee can startdrawing such benefit 60 days before theexpected birth of her child. After thebirth of the child, the parents can drawparental benefits for 480 days (the

parental benefits period is reduced bythe number of days’ benefits drawn bythe mother prior to the birth of the child).This right also applies to adoptiveparents. The days for which parentalbenefit is payable are divided equallybetween the parents, and, with theexception of 60 days, may betransferred from one parent to the other.Sole custodians are entitled to all480 days themselves. The benefit maybe drawn at any time until the childreaches the age of eight or completesthe first class of school. The parents canchoose to draw full, three-quarters,one-half, one-quarter or one-eighthparental benefit.

Irrespective of whether parental benefitsare paid or not, a parent has the right tofull leave of absence for custody of itschild until the child is 18 months old.Thereafter, parental leave can only betaken together with parental benefit (seeabove).

In addition, parents are also generallyentitled to leave in order to care for asick child under the age of 13, as wellas children between 13 and 16 who arein special need of care and supervision.In such cases the parent is entitled totemporary parental benefits, paid by theSocial Insurance Office, amounting to80 per cent of the salary, capped at SEK655 (in 2007) per day.

The employer is not required to makeany additional maternity or parentalpayments, and parents are, unlessotherwise agreed, solely compensatedthrough the social security system.However, to some extent the employeesearn vacation pay during their leave.(For each child, the employee is entitledto count up to 120 days of parentalleave, or 180 days for single parents, asleave of absence that qualifies for paidvacation days. For each day of suchabsence, the basis for calculating thevacation pay is increased by a sumcorresponding to the employee’saverage daily salary in the employmentover the remaining qualifying year ofservice.) Pregnant employees who havea physically demanding job are entitledto be transferred to other duties. If, insuch a case, the employer cannot offerthe employee some other form of work,


193

the employee is entitled to pregnancybenefit.

9.3 IllnessThe employer must pay sick pay to itsemployees in respect of the first 14 daysof sickness, with the exception of thevery first day of sickness (qualifying day).Such compensation amounts to 80 percent of the salary, unless a higheramount is stipulated in a relevantcollective agreement or agreed with theemployee. Thereafter sick employeesmust be registered with their local SocialInsurance Office. This office will providefor sickness benefit consisting of dailycompensation. As a general rule, theemployer is obliged to pay 15 per centof such compensation as long as theemployee is on fulltime sick leave.(The new government has, however,indicated that this obligation shall beabolished.) There is no maximum periodof sickness absence, and dailycompensation will be paid throughoutthe period of absence. Sickness benefitis paid at the rate of approximately80 per cent of normal salary subject to amaximum daily amount, which iscapped at SEK 655 (2007). Sick payand sickness benefit are taxable.

9.4 Other Time OffEmployees are entitled to paid or unpaidleave for, amongst other things, tradeunion activities, public work, education,non-competing business activity,language classes (in the case ofimmigrants) and compulsory or voluntarymilitary or civil defence service.

10. Health and Safety10.1 AccidentsThe Health and Safety at WorkRegulations cover almost every type ofemployment, and there are also specificrules relating to particular forms ofhazard. Generally, an employer isobliged to ensure that the work place issafe and to make such safetyarrangements as are necessary toensure that proper care is taken ofemployees employed in them. Liability isalso imposed upon manufacturers ofequipment or dangerous materials,which are used by employees in thecourse of their employment.

If an employer does not take sufficientcare or otherwise fails to comply withhealth and safety requirements, criminalliability may arise, as well as civil liability(i.e. damages) and a liability to pay acompany fine (Sw: företagsbot).(A company fine is a specific legalconsequence (Sw: särskild rättsverkan)that a court under certain circumstancescan impose directly on a company orother legal entites conducting businessfor infringements committed in thebusiness activities. The amount issubject to an upper limit of SEK10,000,000.). Furthermore, the employerhas a general legal duty to rehabilitateinjured or sick employees.Compensation for injuries at work ispaid out of the work injury insurancescheme.

11. Industrial Relations11.1 Trade UnionsUnder Swedish labour law an employerand an employee have the right tobelong to an organisation and to beactive in it. In addition, employees’organisations have the right to ask forconsultations in relation to all mattersrelating to the relationship betweenemployer and employees.

Sweden does not have a formal systemfor recognising unions. However, unionswhich have entered into collectiveagreements have more extensive legalrights than other unions concerning, forexample, information and consultation.There are collective provisions providingfor the right to distribute informationduring work hours, but not to recruitnew members during work hours.Besides organisations such as theSwedish Federation of Trade Unions(LO), the Swedish Federation of White-Collar Workers (TCO) and the SwedishFederation of Professional Associations(SACO) and the Private Sector White-Collar Workers’ Cartel (PTK, which is abargaining cartel that unites a number ofsectoral unions belonging to SACO orTCO), there are a large number ofnational unions for different categories ofemployees. Private employers areaffiliated to national organisations andnational employers’ federations. Stateand local government employers havetheir own organisations.

11.2 Trade DisputesSubject to what is stated below, tradeunions are entitled to take industrialaction, for example a strike. Employeescannot be dismissed for taking suchaction, unless the employee hasparticipated in an extended illegal strike.However, an employee can bedismissed on account of the effects of astrike, for example, the liquidation of acompany following a strike.

The general rule is that where acollective agreement governs the issuesin question both employers andemployees are bound not to takeindustrial action during the term of theagreement. Only if an issue withinapplicable co-determination provisions isat issue and negotiations have failed,industrial action may follow. Damagescan be awarded for failure to complywith the co-determination rules.

11.3 Collective AgreementsCollective agreements are an importantfeature of the Swedish labour system.They are usually entered into by thenational federations of unions andemployers’ organisations.Significant parts of labour legislationcan be changed or adjusted throughcollective agreements.

Collective agreements can benegotiated at a local or national levelalthough at present the trend is towardslocal level agreements. All categories ofemployees can be covered.

Agreements must be in writing and arelegally enforceable both in respect of theemployer and the members of therelevant organisations after signing.

Collective agreements often containrules on what is called “prolongation”.The law, however, only stipulates that anotice procedure must be included.There are no registration requirementsfor such agreements.


The most important collective labour lawprinciple in Sweden provides for co-determination at work. More detailedprovisions in relation to co-determinationat work are contained in collective



194


agreements. In short, trade unionsalways have the right to consult anemployer on matters, which concern therelations between the employer and themembers of the union. In certaincircumstances, the employer mustinitiate consultations with trade union(s)before it issues or reaches a decision.Trade union rights to consultations arecomplemented by certain rights toinformation.


12.1 GeneralSweden has implemented the AcquiredRights Directive. The effect of this is thatthe employees who are working in abusiness, which is transferred, willthemselves be transferred with thebusiness on the same terms andconditions of employment they hadbefore the transfer. However, accruedrights to old-age, invalidity and survivorsbenefits are not taken over by the newemployer. The employee may object tobeing transferred, in which case theemployee remains employed by thetransferor.

The transfer will not, as such, constitute“an objective ground” for dismissal.Thus, the transferor may not dismissemployees due to a prospectivepurchaser’s wish to acquire a businesswith a reduced workforce.

If the transferor of a business is boundby a collective agreement, the purchaserwill automatically be bound by suchagreement provided that the purchaseris not already a party to anothercollective agreement that may beapplied to the transferred employees.The transferor may, however, terminatethe collective agreement prior to thetransfer. If notice of termination is givenless than sixty days before the transfer,the purchaser will however be bound bythe collective agreement until sixty days’notice has expired.

Where the purchaser is bound toanother collective agreement, it must stillapply the terms of employmentstipulated in the transferor’s collectiveagreement in relation to the transferredpersonnel for one year or until the termof the transferor’s collective agreement

has expired (if shorter). As a result, apurchaser already bound by a collectiveagreement may have to apply differentterms (e g salaries, working hours andthe like) to incoming employees than itapplies to its own employees fallingwithin the same categories.

A share transaction does not normallyraise any specific employment lawrelated issues except for the informationand consultation requirements(see below).

12.2 Information and consultationrequirements

Under the Swedish Co-determinationAct, an employer, bound by a collectiveagreement(s), is obliged to initiateconsultations with the local tradeunion(s) before a decision is made,which involves a significant change in itsbusiness. A transfer of business isalways classified as a significant change.There is no threshold number ofemployees triggering this obligation.Further, the sale of a major subsidiary isalso likely to trigger the obligation toconsult.

If the employer is bound by one orseveral collective agreements, theconsultations must take place with thetrade union(s) party to the agreement(s).A trade union with a collectiveagreement is deemed to represent allthe employees, not just the members ofthat union. As a consequence, it issufficient to perform the consultationswith such union(s). If the employer is notbound by any collective agreement it isnevertheless obliged to consult with alltrade unions that have at least onemember affected by the transfer ofbusiness.

There is no fixed minimum or maximumtime period during which theconsultations must take place.The consultations must be carried outand finalised before the employer makesa final decision and should be initiated ata sufficiently early stage of theemployer’s decision-making process sothat the consultations form a natural andeffective part of the process.The rationale being that the trade unionshould have a realistic opportunity ofinfluencing the decision.

If an agreement is not reached with thelocal trade union, the employer must – ifso requested by the union – also consultsuch union at a central (national) level.However, once the consultation processis completed, the employer is entitled tomake its own decision regardless ofwhether the trade approves or not.

The length of a consultation processwith the trade union(s) will be dictatedby the trade union’s attitude towards theissues in question and whether or notthey escalate the consultation up to anational level. Typically, the consultationprocess will be longer if redundanciesare involved.

There is no other obligation to informand consult any employeerepresentatives, employees or workscouncils in connection with a transfer ofbusiness unless there are supplementalprovisions in any applicable collectiveagreement or applicable EuropeanWorks Councils agreement.

12.3 Notification of AuthoritiesApart from notice to the CountyEmployment Board (Sw:länsarbetsnämnd) in the event oftermination due to redundancy of morethan five employees (see section 13.5below), the employer has no obligationto inform any governmental body of amerger or transaction.

12.4 LiabilitiesSanctions and remedies for breach ofthe Co-determination Act and/orcollective agreements are mainlydamages, both financial and punitive.A court injunction cannot be obtained toprevent or reverse a transaction nor canany criminal sanctions be enforced dueto a failure to consult.

13. Termination13.1 Individual TerminationA dismissal must be given in writing bythe employer to the employee, and theemployee must be informed of theprocedures by which he or she canappeal against a dismissal. The formalprocedure is to notify the employee, aswell as his/her trade union, of theproposed dismissal and for either theemployee or such trade union to be ableto ask for consultation in relation to the


195

matter. If no agreement is reached, theemployee may be given notice. If theemployer fails to follow the formalprocedure, the dismissal will not beinvalid but the employer may be liable topay damages in consequence.

13.2 NoticeDifferent notice periods apply toemployees employed before 1 January1997 and those employed thereafter.For employees employed before thebeginning of 1997, the period of noticeof termination to be given depends onthe employee’s period of service andage. The shortest period of notice is onemonth. An employee, who at the timenotice is given has been employed bythe employer for the last six months, orfor a total of twelve months during thelast two years, is entitled to a period ofnotice of:

■ 2 months if he/she has reached theage of 25;



■ 5 months if he/she has reached theage of 40; and

■ 6 months if he/she has reached theage of 45.

For employees employed on 1 January1997 and thereafter, the period of noticeof termination depends only on theemployee’s period of service with theemployer. Such employees are entitledto a period of notice of:

■ 1 month if service is less than2 years;

■ 2 months if service is at least2 years;



■ 5 months if service is at least8 years; and

■ 6 months if service is at least10 years.

Collective agreements and individualemployment contracts may containother rules, which provide for a longernotice period. If agreed between theparties, an employee can be paid in lieuof notice.

13.3 Reasons for DismissalIt is for an employer to justify dismissalon objective grounds. Amongst thegrounds which can be relied upon are:lack of work, severe incompetence orfailure to co-operate and neglect of duty.However, the practice of the labourCourt is to require strict proof from theemployer. Swedish law distinguishesbetween dismissal with or withoutnotice. In cases of gross misconduct,dismissal without notice is permissible.In the examples referred to above,notice will usually be required.Before notice of dismissal is given, theemployer must ascertain whether it ispossible to assign the employee toanother vacant position at the company.Only if the employer is unable to findother duties for which the employee hasthe necessary skills are there objectivegrounds for termination. In the event oftermination due to lack of work, theemployer has to apply the “last in-firstout” principle.

A dismissal can be held to be invalidand an employee may be able to remainat work whilst any litigation concerninghis or her employment is resolved.

13.4 Special ProtectionGenerally, there is no special protectionagainst dismissing, for example,disabled employees. However, any suchdismissal must be objectively justified aswith other dismissals.

It should however be noted that unionrepresentatives enjoy extensiveprotection under the Swedish TradeUnion Representatives Act (Sw: lag omfacklig förtroendemans ställning påarbetsplatsen). Such representatives areprotected against dismissals on thegrounds of their union activities.Further, in the event of redundancies,union representatives are entitled to begiven priority to continue in employment,

provided continued employment is ofparticular importance for the purposesof the general union activity at the workplace concerned (and not only in relationto the redundancy situation). The onus ison the trade union to determine whethercontinued employment is of “particularimportance” and not the employer, northe individual representative. Suchissues can, however, finally be settled bycourt.) If the employer contravenes thisrule, the dismissal can be declared voidby the court upon application by therepresentative.

13.5 Closures and Collective DismissalsIn the event of termination due toredundancy of more than fiveemployees, the employer has to notifythe County Employment Board.(The Government has proposed in a billthat the relevant authority will be thePlacement Agency(Sw: Arbetsförmedlingen) with effectfrom 1 January 2008.) In addition,the employer must also initiate co-determination consultations with theaffected unions.

The employer may not decide at its owndiscretion which employees are to bemade redundant. Instead, as a generalrule, the principle “last in – first out”applies. This mandatory rule means thatthe employer must prepare a priority listfor each production unit and for eachcollective bargaining sector (if there aremore than one). The employee’s positionon the priority list depends on his lengthof service with the employer or othergroup companies and, to some extent,age. Where two employees have equallength of service, the older will be givenpriority. An employee will, however, nothave priority over other employeesunless he has the necessary skills forthe job. There are, however, certainexceptions to these rules with regard tosmaller companies (ten employees orless). Finally, it should be noted that it ispossible to depart from the priority rulesby collective agreement.

14. Data Protection14.1 Employment RecordsThe collection, storage and use ofinformation held by employers abouttheir employees and workers(prospective, current and past) are



196


regulated by the Personal Data Act(PDA) (Sw: personuppgiftslagen(1998:204)), which implements the EUData Protection Directive. In additionsuch processing of personal data is alsoregulated by principles of labour law aswell as criminal legislation. Infringementof the PDA may under normalcircumstances lead to fines andcompensation claims from affectedemployees.

As a basic rule, processing of personaldata is only permitted with the expressconsent from the registered person.However, the processing of personaldata is permitted without consent underspecific circumstances, inter alia if it isnecessary for the performance of theemployment contract. Employers, asdata controllers, are under an obligationto ensure that they process personaldata about their employees (whetherheld on manual files or on computer) inaccordance with specified principlesincluding but not limited to the following:a requirement to ensure that data is onlyprocessed when necessary, that thedata is accurate, up to date, and is notkept longer than necessary and arequirement that it is stored securely toavoid unlawful access or accidentaldestruction or damage to it. Furtherspecific restrictions apply whenprocessing sensitive information,including but not limited to health andmembership in trade unions.

Employers always have to inform theemployees about the purposes of theprocessing of personal data. Employersare generally advised to ensure theyhave some sort of document retentionpolicy in place and to ensure that thestaff are aware of their data protectionobligations.

14.2 Employee Access to dataEmployees, as data subjects, have theright to make a subject access request.This entitles them, subject to certainlimited exceptions, to be told what datais held about them and who it isdisclosed to. Employers are liable toprovide, on a written request, once perannum free of charge information to theemployees regarding the personal datathat the employer is processing aboutthem. There is normally a time limit of

one month for responding to such arequest. Subject access requests coverpersonal data held in manual andelectronic records, such as e-mail.

14.3 MonitoringThe monitoring of employee e-mail,Internet and telephone usage andClosed Circuit TV monitoring isregulated by the PDA amongst otherpieces of legislation. From a PDAperspective monitoring is permissibleprovided that it is carried out inaccordance with the PDA principles andprocessing conditions. A basicrequirement is always that themonitoring has to be necessary and anyadverse impact of monitoring onemployees must be justified by itsbenefit to the employer and/or others.Express employee consent tomonitoring is not usually required,however, employees should be madeaware that monitoring is being carriedout, the purpose for which it is beingconducted and who the data will besupplied to, unless covert monitoring isjustified. Reading the contents of privatee-mails is not permitted, unless there isserious suspicion of disloyalty or criminalactivity. It should be noted thattelephone monitoring and Closed CircuitTV monitoring are, in addition to thePDA, regulated by specific restrictivelaws.


An employer who wishes to provideemployee data to third parties must doso in accordance with the PDAprinciples and processing conditions.In many cases it may be necessary toobtain express consent to suchdisclosure in the absence of a legitimatebusiness purpose for the disclosure anddepending on the nature of theinformation in question and thegeographic location of the third party.Where the third party is based outsidethe EEA it should be noted that the PDAprohibits the transfer of data to acountry outside the EEA unless thatcountry ensures an adequate level ofprotection for personal data or one of aseries of limited exceptions apply.The EU Commission has set outstandard contractual clauses regardingprocessing of personal data that may be

used in order to enable a company in athird country, which does not assure anadequate level of personal dataprotection, to process such data in alawful manner. In the context ofcommercial transactions whereemployee data is requested care mustbe taken to comply with the PDA.Where possible anonymised data shouldbe provided, where this is not possiblethe recipient should be required toundertake in writing that it will only use itin respect of the transaction in question,will keep it secure and will return ordestroy it at the end of the exercise.


197

United Kingdom1. IntroductionThis section describes the provisionswhich are generally applicablethroughout the United Kingdom, butwith particular emphasis on England andWales. Both Scotland and NorthernIreland have legal systems separate fromthat of England and Wales (although inthe field of employment law, the law inall three jurisdictions is similar).

The most important source of lawregulating the employment relationship isthe common law but statutenevertheless intervenes to protectemployees (most notably in the fields ofdiscrimination and dismissal and togovern certain areas of collective labourlaw) and to impose duties on employers(for example, in relation to pensions andshare schemes). In general, it is notpossible to contract-out of statutoryemployee protection. Traditionally,collective agreements have not beenaccorded as much importance in the UKas in other parts of the EU and are notnormally legally enforceable, howeverlegislation does provide for compulsorytrade union recognition by an employerwhere the majority of the workforce wishit.

Many disputes between an employerand employee are settled in speciallabour Courts (Employment Tribunalsand the Employment Appeal Tribunal)with a view, in theory at least, toproviding a specialised, quicker andmore cost efficient approach to resolvingdisputes than is normally possible usingthe ordinary Courts.


2.1 GeneralThe common law and relevantemployment legislation apply equally toemployees at every level. Some of themore recent employment legislationcovers “workers”, a term which coversemployees, agency workers andcontract staff.

2.2 DirectorsThe position of directors of private andpublic limited companies, who may or

may not also be employees of thecompany, is further regulated bycompany law.

2.3 OtherPart-time employees have a statutoryright which, broadly speaking, entitlesthe employee to be treated no lessfavourably in respect of their terms andconditions of employment than acomparable full-time employee. A similarprotection exists for employees on fixedterm contracts who also have the rightto be treated no less favourably inrespect of terms and conditions ofemployment than a comparablepermanent employee performing similarwork. Generally speaking executivedirectors are engaged under serviceagreements and are regarded asemployees as well as officers of theemploying company.

3. Hiring3.1 RecruitmentEmployers recruit through a variety ofsources, including via the Internet andby advertising in newspapers orjournals. Private, fee-chargingrecruitment agencies are commonlyused for some types of employees, forexample, secretarial staff and senior andprofessional staff. State run “JobCentres” provide a free recruitmentservice which is used by employers torecruit less senior employees. There is,however, no obligation on employers touse the state Job Centres. Privaterecruitment agencies no longer require alicence before they can operate but arenevertheless subject to regulation.

3.2 Work PermitsWork permits are required for most non-EEA nationals, and may be granted forup to a maximum of five years. (Swissnationals are treated in the same way asEEA nationals.) Application must bemade to the Border and ImmigrationAgency, an executive agency of theHome Office (or, in Northern Ireland, theTraining and Employment Agency),before the employee comes to the UK.British overseas territories citizens andcitizens of Commonwealth countriesgenerally do not require a work permitprovided they have a British citizenpassport or a right of abode. It isnormally necessary to demonstrate by

advertising that a local person cannot berecruited for the position before a workpermit is issued, but this requirement iswaived for intra group transfers andrecognised skill shortages (includingcertain types of engineering positions).An innovator category has beenintroduced, aimed at entrepreneursseeking to exploit the economicopportunities of technology ande-commerce. Particularly highly skilledindividuals may apply under the HighlySkilled Migrant Programme which isrestricted to a specific post or employer.The family of a work permit holder ofHighly Skilled Migrant must obtain entryclearance from the appropriate Britishdiplomatic mission in their countrybefore they seek to join the work permitholder in the UK. EU nationals fromPoland, Lithuania, Estonia, Latvia,Slovenia, Slovakia, Hungary and theCzech Republic are required to registerwith the Home Office (under the WorkerRegistration Scheme) if they plan towork for one month or more. Once suchworkers have been working legally in theUK for 12 months without a break theyhave full rights of free movement andcan apply for a residence permitconfirming their rights.

Access for nationals from the new EUaccession countries of Romania andBulgaria will depend on whether they areclassified as skilled or unskilled workers:

■ Skilled Romanian and Bulgarianworkers with appropriatequalifications and experience areallowed to come to the UK on workpermits to take up a specific postwhere no suitable UK applicants canbe found. Once they have workedlegally in the UK for 12 monthswithout a break they are exemptfrom any further requirements toobtain permission to work.

■ Particularly highly skilled Romanianand Bulgarian workers may beadmitted under the Highly SkilledMigrants Programme.

■ Low-skilled migration from Bulgariaand Romania is restricted to thosesectors of the economy (agriculturaland food processing) where the UKalready has low-skilled schemes is

Employment and Benefits in the European UnionUnited Kingdom


198


subject to a strict quota which willnot exceed 20,000 workers per year.Workers on these schemes will haverights to work limited to six monthsthat will not give them access tobenefits and public housing.

All of these arrangements are expectedto be reviewed by the end of 2007.

It is a criminal offence for an employer toemploy someone who is subject toimmigration control (most non Britishand EU citizens) who does not haveappropriate permission to work in theUK. Illegal workers could face on thespot fines of £1000 and companiesemploying such individuals can facefines of up to £5,000.

In March 2006 the Government releaseda command paper for a five tier systemfor migration into the UK whereapplicants will score points based onattributes which predict their success inthe labour market and the likelihood ofthem complying with their conditions ofleave in the UK. This would replace theexisting work permits system. However,details of the new scheme have notbeen announced and it is not yet clearwhen this scheme will be implemented(although the Highly Skilled Migrantprogramme has recently been amendedto align it with the government’sproposals regarding the points system).

4. DiscriminationDiscrimination in the work place,whether it be in connection withrecruitment, treatment during the courseof employment, in respect of terminationand in certain circumstances followingthe end of the employment relationship,is rendered unlawful under a number ofstatutes and statutory instruments: theEqual Pay Act, the Sex DiscriminationAct (which, together, prohibit sexdiscrimination and includesdiscrimination on the grounds of genderreassignment and marital status), theRace Relations Act (which prohibitsdiscrimination on grounds of colour,race, nationality and ethnic or nationalorigins), the Disability Discrimination Act(which prohibits discrimination on thegrounds of a person’s disability), theEmployment Equality (Sexual

Orientation) Regulations, theEmployment Equality (Religion or Belief)Regulations and the EmploymentEquality (Age) Regulations (whichprohibit discrimination on the grounds ofsexual orientation, religion or belief andage respectively). In Northern Ireland, itis additionally unlawful to discriminate onpolitical grounds.

It is also illegal to discriminate against anemployee on grounds of his or hermembership or otherwise of a tradeunion.


5.1 Freedom of ContractIt is a basic principle that parties are freeto contract on whatever terms theychoose. However, certain provisions, forexample those concerned withpreventing competition by a formeremployee, are not enforced by theCourts if they are considered in restraintof trade. In addition, subject to certainexceptions, attempts to contract out ofstatutory employment protection arevoid. Contracts may be for a fixed or anindefinite period (i.e. terminable onnotice), as the parties think mostappropriate. However, the use ofsuccessive fixed-term contracts isrestricted.

An employee engaged under a fixedterm contract will be classified as apermanent employee if all of thefollowing conditions are satisfied:

■ The employee is currently employedunder a fixed term contract; and

■ That fixed term contract haspreviously been renewed or theemployee was previously employedunder another fixed term contractbefore the start of the currentcontract; and

■ The employee has beencontinuously employed under fixedterm contracts for a period of fouryears or more (ignoring any servicebefore 10 July 2002); and

■ At the time the contract wasrenewed (or entered into) the

employer could not objectively justifythe use of a fixed term contract (e.g.where funding is only available for alimited period).

There is, however, no restriction on thelength of a first fixed-term contract.

For the purposes of statutory protection,there is little distinction between theposition of employees on fixed-term andindefinite contracts, since the accrual ofcertain of the more significant rightsdepends on the period the employeehas worked irrespective of whether thisis under a fixed-term or indefinitecontract. Broadly speaking, anemployee will enjoy significant statutoryrights after one year’s continuousemployment, although some rights,especially those associated with anti-discrimination legislation, are exercisableirrespective of length of service.In addition, employers will not be able totreat employees on fixed-term contractsless favourably than similar permanentemployees.

5.2 FormThere are no particular requirements asto the form of contracts of employment,which may be oral or written (except inScotland where a contract for a term ofmore than 12 months should be inwriting). In the case of senior employees(for example, managing directors), thecontract is more likely to be contained ina formal written service agreement.

However, there is a statutoryrequirement that all employees beprovided with a single documentcontaining written particulars of certaindetails of their contract of employmentwithin two months of commencement ofemployment.

5.3 Trial PeriodsIt is not uncommon for parties to agreea trial period but there are no specificlegal requirements governing suchperiods and, since (with certainexceptions) an employee does notqualify for statutory protection againstunfair dismissal until employed for oneyear, this allows the employer areasonable period to assess theemployee’s suitability.


199


Although there are no statutory rulesgoverning confidential information, anemployee is bound by a general duty ofgood faith and a duty not to disclose theemployer’s confidential information.The extent of these general duties is notin all cases well defined and a prudentemployer may, depending on the natureof the business, consider including anexpress confidentiality provision in thecontract of employment.

Although express provisions in acontract may be used to stop anemployee from competing with hisemployer both during and after theemployment, it should be noted thatsince provisions which purport to restrictcompetition after termination of theemployment are generally regarded ascontrary to public policy, they will onlybe enforceable if they are reasonableand the employer has a legitimateinterest to protect (i.e. confidentialinformation or trade connections).

5.5 Intellectual PropertyBroadly speaking, if intellectual propertyis created by an employee during thecourse of employment, it will belong tothe employer and compensation is onlypayable to the employee in limitedcircumstances.

6. Pay and Benefits6.1 Basic PayThere is a national minimum wage of£5.35 per hour. It is £4.45 per hour inthe case of young people aged 18 to 21and those aged over 22 and doingaccredited training. For 16 to 17 yearolds the rate is £3.30 an hour.These rates are generally increasedannually in October of each year.From 1 October 2007, the nationalminimum wage will rise to £5.52 perhour for adults, £4.60 per hour foryoung people aged 18 to 21 and thoseaged over 22 and doing accreditedtraining, and £3.40 per hour for 16 to17 year olds.

Lower-grade workers in the UK aregenerally paid a weekly wage, oftendetermined by reference to an hourlytime rate, although in some industriesit is customary for workers to be paid

“piece-rates” according to the amountof work done. Overtime at a premiumrate is generally paid in respect ofadditional hours worked. More senioremployees are normally paid monthlyin arrears and are not generally paidfor overtime worked.

It is not common for pay to be indexlinked and, subject to the nationalminimum wage, there are no legalobligations on employers to increasewages.

6.2 Private PensionsAlthough state pensions are providedunder the social security system(comprising a basic state pension andan additional proportion currently relatedto an individual’s earnings), privatepension schemes are of importance.Private pension provision may be byway of an employer-sponsoredoccupational pension scheme, or by anindividual employee’s own personalpension scheme.

The cost of such provision, to both theindividual employee and the employer,may vary enormously depending on thetype of benefits provided and theindividuals involved. There is no longerany statutory limit on the level ofcontributions which can be made to a“registered pension scheme”. Instead oflimits on contributions there is now an“annual allowance” available to theindividual. If the individual’s total “pensioninput amounts” (essentially the value ofthe contributions from both the individualand the employer to a pension scheme)in any particular tax year exceeds theannual allowance for that year then a taxcharge will be levied on the excess.This charge is payable by the individual.

Private pension provision is currently notcompulsory but, since 8 October 2001,employers with more than fiveemployees, broadly speaking, have hadto offer access to a stakeholder pensionscheme to those employees for whomthey make no other pension provision.The rules are however more complexthan this and employers should seekadvice as to whether they are affectedby the requirements.

A stakeholder pension scheme is adefined contribution (money purchase)scheme with low charges which issubject to strict regulation and isregistered as a stakeholder pensionscheme with the Occupational PensionsRegulatory Authority. These schemeshave been available since 6 April 2001.Employers are not obliged to establishstakeholder pension schemesthemselves but they must, followingconsultation with the relevant employeesand their representatives, designate ascheme and administer a payrolldeduction facility for those employeeswho wish to make contributions to thedesignated scheme. (The deductions willbe made from an employee’s net payrather than gross pay.) Representativesof the scheme must also be givenreasonable access to the relevantemployees in order to provide them withinformation about the scheme.The employer is not obliged (as yet) tocontribute to the scheme itself.

6.3 Incentive SchemesShare schemes are not mandatory in theUK but are increasing in popularitybecause of the favourable tax treatmentthey receive and there is a welldeveloped legislative framework in placeto govern such schemes.

6.4 Fringe BenefitsCommon fringe benefits may typicallyinclude private medical insurance fortreatment taken outside the NationalHealth Service and cars (for more senioremployees particularly). Such fringebenefits may be either contractual or ex-gratia. If benefits are contractual, caremust be taken if the employer proposesto withdraw them.

6.5 DeductionsAlthough generally employers areprohibited from making deductions frompay, they are obliged to deduct incometax at source through the “Pay As YouEarn” (PAYE) scheme. They are alsoobliged to deduct employees’ NationalInsurance contributions (social securitycontributions).

7. Social Security7.1 CoverageThe single state administered socialsecurity system provides benefits by



200


way of pensions, unemploymentbenefits, family-based benefits andsupport for individuals on low income.Employers should be aware both of thecosts involved, and of the administrativeburden of some state guaranteedbenefits (for example, statutory sick payand statutory maternity pay)responsibility for which has beendevolved to employers.

Health care has, traditionally, beenprovided by the state-run NationalHealth Service. However, recent reformshave been aimed at encouragingincreased use of private medicalinsurance and private medical insurancehas become an increasingly commonemployee benefit.

7.2 ContributionsEmployers must deduct fromemployees’ pay National Insurancecontributions payable by employees andmake an employer’s contributions inrespect of each employee. NationalInsurance contributions are payable byemployees at a rate of 11 per cent ofearnings between the lower and upperearnings limit which are fixed each year,(for the year 2007/08 these are £100and £670 per week) and a further oneper cent on earnings over £670 a week.Employer’s contributions are 12.8 percent above £100 per week for the year2007/08 and uncapped. Lower rates arepayable if the employees are in“contracted-out” employment (that is if,in return for paying the lower rate ofcontributions, the employer and/or theemployee make separate arrangementsto cover part of what would, otherwise,have been the additional state pension).

8. Hours of WorkThe usual working week is 40 hours inindustry and 35 hours in offices. Specificlimitations are imposed by the WorkingTime Regulations on the hours workedeach day and each week by “workers”(this includes employees and agencyworkers). Generally working time mustnot average more than 48 hours perweek over a reference period of17 weeks. Workers are also entitled to adaily rest of at least 11 consecutivehours in each 24-hour period and aweekly rest period of not less than24 hours in any seven day period.

Night workers (i.e. where at least threehours of daily working time is worked atnight as a matter of course) must notwork in excess of eight hours in eachperiod of 24 hours.

9. Holidays and Time Off9.1 HolidaysIn England and Wales, there arenormally eight public holidays perannum. All workers are entitled to aminimum of four weeks’ paid annualleave which accrues on a pro rata basisfrom the first day of employment.Currently, this four week entitlement caninclude public holidays. Money may notbe paid in lieu of untaken statutoryholiday entitlement except ontermination of employment.The Government has recentlyannounced firm proposals allowingemployees additional paid leave toreflect the eight Bank Holidays inaddition to the minimum four weeks’paid leave, to provide for a maximumstatutory holiday entitlement of 28 daysfor someone working a five day week.Under the proposals statutory annualleave entitlement will increase in twostages, rising to 4.8 weeks (24 days)on 1 October 2007 and to 5.6 weeks(28 days) on 1 October 2008.Employees will not, however, necessarilybe entitled to take this additional paidholiday when the Bank Holiday actuallyfalls, but may be required to take it atsome other time if that suits theemployer’s business better.

9.2 Family LeaveFemale employees with babies due onor after 1 April 2007 are entitled to26 weeks’ ordinary maternity leave and26 weeks’ additional maternity leave(there is no longer a length of servicerequirement). Statutory Maternity Pay(SMP) is payable for 39 weeks. SMP ispayable for six weeks at 90 per cent ofaverage weekly earnings and 33 weeksat a flat rate (£112.75 (from April 2007))or the 90 per cent rate if this is lower.The flat rate of SMP is revised in Aprileach year.

Men and women with one year’scontinuous service are entitled to13 weeks’ unpaid parental leave inrespect of children under five.Employees of disabled children under 18

are entitled to unpaid parental leave of18 weeks. Employees are also allowedunpaid time off to deal with emergenciesarising in relation to dependants.

Fathers (and one adoptive parent) areentitled to elect to take one or twoweeks’ paid paternity leave, payable atthe same rate as SMP. The Governmentproposes to introduce paid additionalpaternity leave of up to six months. It isanticipated that additional paternityleave rights will not be introduced before2008 at the earliest.

9.3 IllnessEmployees absent from work by reasonof sickness or injury have a right toreceive statutory sick pay (SSP) fromtheir employer. Part of the cost may berecouped from the employer’s NationalInsurance contributions once paymentsof SSP exceed a certain level. The rateof SSP in April 2007 is £72.55. SSP isrevised in April each year.

In addition, it is not unusual foremployers to agree to pay employeesan amount greater than statutory sickpay for a limited period, the length ofwhich will vary, depending upon thecustom of the industry and the status ofthe employee.

9.4 Other time offCertain employees have the right torequest flexible working arrangements,namely those employees who areparents of children under six, or 18 if thechild is disabled. Since 6 April 2007, thisright has been extended to carers ofcertain adults. In order to be eligible tomake such a request, the employeemust have worked for their employercontinuously for 26 weeks.

10. Health and Safety10.1 AccidentsEmployers are under a duty to haveregard for the health and safety of theiremployees while at work (but nottravelling to or from work), and areobliged by statute to maintain insuranceagainst liability for injury and diseasearising out of employment. These dutiesarise under both statute and thecommon law. The Health and Safety atWork etc Act 1974 lays down thegeneral principles to be followed by an


201

employer in relation to health and safety,and criminal as well as civil liability mayresult from a failure to comply with theprovisions of that Act. In addition to thegeneral principles laid down by that Act,there are numerous specific Acts andregulations governing certain types ofwork place and certain types of workactivity.

10.2 Health and Safety ConsultationEmployers in the United Kingdom areunder an obligation to consult with theiremployees on health and safety mattersand are obliged to have a writtenstatement on their general health andsafety policy which must be available toemployees. Consultation must becarried out through a safetyrepresentative nominated by arecognised trade union (or a Health andSafety Committee, if required by theunion), elected employee representativesor directly with employees. Certaininformation must be made available bythe employer.

11. Industrial Relations11.1 Trade UnionsThe importance of trade unions hasdeclined over the last twenty years,although this position may now bechanging. However, in some industriesunionisation is still relatively strong.Major unions include the GMB, Unisonand the new super union that will beformed from the merger of the TGWUand Amicus (all three being generalunions covering many industry sectors)and sector specific unions, e.g. Unifi(banking insurance and financial servicesemployees).

There is now a legislative scheme whichprovides for compulsory recognition of atrade union by an employer where amajority of the relevant workforcesupport the union in businesses whichemploy at least 21 employees. If a unionbecomes recognised the employer andunion must try and conclude aprocedure agreement to regulate theirrelationship and to determine thematters to be the subject of negotiation.In the absence of agreement, aprocedure based on a standard modelwill be imposed. Closed shops areillegal.

11.2 Collective AgreementsCollective agreements betweenemployers and trade unions are mostusually found in the industrial sector andoften regulate matters such as pay,working hours, holidays, disputeprocedures and procedures to deal withredundancy. However, whilst normallynot legally enforceable between theemployer and the union at present, suchcollective agreements may have legalconsequences for the employer, sincecertain terms in such agreements maybecome incorporated (either expresslyor by implication) into individualemployees’ contracts of employmentand where this happens becomeenforceable (collectively agreed wagerates, for example). Furthermore, insome industries unionisation remainssufficiently strong for industrial pressureto prove an effective means of securingobservance of otherwise legallyunenforceable collective agreements.Employers who have had to recognise aunion as a consequence of compulsoryrecognition imposed on them (or haveagreed to) will have to negotiate with theunion concerning pay, hours, holidaysand training.

11.3 Trade DisputesThe United Kingdom does not have acomprehensive “strike law” or anyenshrined right to strike. Rather,individuals and unions are grantedcertain limited statutory protection fromliability, which they would otherwiseincur under the common law, whentaking industrial action pursuant to atrade dispute. To enjoy such immunity,trade unions are required to hold ballotswhich conform to statutoryrequirements. An employee who takesindustrial action loses the right to payduring that period and is not entitled toreceive unemployment benefit (althoughthe employee’s family may in certaincircumstances receive other socialsecurity benefits). It is unfair to dismissan employee who is taking “protected”industrial action unless it lasts more thantwelve weeks and the employer hascomplied with certain proceduralrequirements.


There are at present no formalised

requirements for employee participationin the UK, although some employersoperate share schemes as an additionalremuneration incentive. However,obligations do arise with respect toconsultation and the provision ofinformation to appropriaterepresentatives (these are usually eitherelected employee representatives orrepresentatives of a recognised tradeunion). The obligations are:

■ Where a union is recognised for thepurposes of collective bargaining,certain information must bedisclosed to that union to assist inthat process.

■ To consult with appropriaterepresentatives in the context of acollective redundancy (see furtherbelow).

■ Employers are required to providecertain information to appropriaterepresentatives upon a businesstransfer regardless of the number ofemployees affected (see furtherbelow).

■ Employers must consult withemployees on health and safetymatters. Consultation has to be withrepresentatives nominated by arecognised trade union, electedemployee representative oremployees directly.

■ Employers with 100 or moreemployees are required to consultwith prospective and activemembers of occupational andpersonal pension schemes and theirrepresentatives before makingcertain specified changes to theamendments.

Under the Transnational Information andConsultation etc Regulations 1999(which implement the European WorksCouncil Directive), any undertaking orgroup of undertakings with at least1,000 employees in the EU and150 employees in more than one EUstate may have to set up a workscouncil or a procedure for informing andconsulting employees at European level.While the Regulations clearly regulatethe initial establishment of the employee



202


negotiating, subsequent negotiations aregenerally up to the parties to regulate.

The European Public Limited LiabilityCompany Regulations (which implementthe Workers Participation Directive)provide for the regular consultation of,and provision of information to, a bodyrepresenting the employees of thecompanies that have formed a EuropeanCompany, in respect of current andfuture business plans, production levels,management changes, collectiveredundancies, closures, transfers,mergers and so on. Management of theparticipating companies andrepresentatives of the employees will berequired to try to reach a voluntaryagreement on the employee involvementarrangements or to agree to rely onnational information and consultationrequirements. Failure to reach agreementwill result in default rules applying.

The Information and Consultation ofEmployees Regulations 2004 (whichimplement the Workers Information andConsultation Directive) apply toundertakings with 100 or moreemployees (and from 6 April 2008 toundertakings with 50 or moreemployees). The legislation does notoblige employers to set up a domesticworks council, or similar information andconsultation forum, in the absence ofthe legislative procedure being triggered.A request by 10 per cent of theundertaking’s employees will trigger theprocedure giving the employer anopportunity to negotiate a voluntaryinformation and consultation process.The nature, subject matter or timing ofinformation and consultation can betailored to the structure and ethos of theundertaking. If no agreement can bereached a default information andconsultation procedure will apply underwhich employers will be obliged toinform and consult employeerepresentatives in relation to a numberof matters, including the recent andprobable development of theundertaking’s activities, its economicsituation and business decisions likely tolead to substantial changes in theundertaking.


12.1 GeneralUpon the transfer of an undertaking,employees are provided with protectionin that their contract automaticallytransfers from the transferor to thetransferee. Any dismissal connected withthe transfer will, in principle, be unfairand give rise to an entitlement to claimstatutory compensation. Changes toterms and conditions of employment byreason of the transfer are void, even ifagreed to by employees except in limitedexceptional circumstances involvinginsolvent employers. Employees canobject to the transfer, should they do sotheir employment is treated as at andend; no compensation is payable.


In the event of a transfer of anundertaking the employer of anyaffected employees must informappropriate representatives of theproposed transfer long enough beforethe transfer to enable consultation aboutany proposed measures to take place.There is no statutory timetable overwhich the process must occur.Affected employees can include any ofthe workforce of either transferor ortransferee affected by the transfer, evenif they are not transferring. Appropriaterepresentatives are representatives of aTrade Union recognised by the employeror, in any other case, appointed orelected employee representatives.The object of the information exercise isto inform the representatives of the factthat a transfer has to take place,including when and why it is to takeplace, and its legal, economic and socialimplications for the employee.The employer must also consult with aview to reaching agreement about anyproposed “measures” which will affectthe employees. There is however noobligation to reach agreement.

12.3 Notification of AuthoritiesIn the absence of any collectiveredundancies, there is no obligation,from an employment perspective, tonotify the authorities of an acquisition ormerger. Competition issues may in somecases require prior notification and/orapproval.

12.4 LiabilitiesIn the event that a transferor ortransferee fails to comply with itsinformation and consultationrequirements a complaint may be madeto an Employment Tribunal and if thecomplaint is upheld, the Tribunal mayaward each affected employeecompensation of up to 13 weeks’ pay,with no limit on the amount of a week’spay. The transferor and transferee arejointly and severally liable for suchcompensation. Failure to inform andconsult will not prevent a transactionfrom completing and injunctive relief isnot available from the Courts to preventa transaction going ahead without theinformation and consultation obligationsbeing met.

13. Termination13.1 Individual TerminationAn employer wishing to terminate theemployment relationship must be carefulto comply with both the statutory andcontractual requirements with regard toreasons for and procedures leading todismissal.

13.2 NoticeStatute lays down a minimum period ofnotice which will apply where thecontract of employment does not makeany provision for notice or thecontractual notice period is less than thestatutory minimum.

The statutory minimum period of noticeis one week for employees with serviceof more than one month but less thantwo years, and one week for eachcomplete year’s service for those whohave worked more than two yearssubject to a ceiling of 12 weeks’ noticeafter 12 years’ employment.

In practice, employees who are seniorexecutives will generally enjoy longernotice periods under their contracts ofemployment (typically three to sixmonths) and very senior employees(for example, executive directors of largecompanies) may have much longernotice periods (although the CombinedCode and institutional investor guidelinesdo not favour a period of more thantwelve months) and the newCompanies Act 2006 requiresshareholder approval for terms of two


203

years or more (from 1 October 2007).Where a contract of employment doesnot state the notice period, whilst thestatutory minimum period of notice willgenerally be applicable to mostemployees, the common law will implyinto the contracts of more senioremployees a right to receive “reasonablenotice” in excess of the statutoryminimum period. The employee’sseniority, length of service and the sizeof the business in which the senioremployee works will be factors indetermining the length of notice wherethe contract contains no expressprovision.

If an employee is dismissed without, orwith insufficient, statutory or contractualnotice without good cause, theemployee may sue the employer fordamages for breach of contract(i.e. “wrongful dismissal”). The basicmeasure of damages will be the salaryand benefits which the employee wouldhave received during the relevant noticeperiod, but this may be subject toadjustment to take account of theremuneration the employee can beexpected to receive from newemployment during what would havebeen the notice period, tax andaccelerated payment.

If an employer prefers that an employeedoes not work his or her notice period,and the employee is not beingsummarily dismissed for grossmisconduct, the general practice is foremployers to pay salary in lieu of thecontractual notice period. There are nospecial formalities for making suchpayments (except as to the deduction oftax where required).

13.3 Reasons for DismissalAlthough the employer is free toterminate the contract of employment,the dismissed employee may have theright to claim compensation for unfairdismissal (even though the employeehas received notice or payment in lieuand has no contractual claim) unless theemployer can show there was a reasonfor dismissal falling within the categoriesset out in the relevant statute; these aremisconduct, incapacity, illegality,redundancy, retirement or some othersubstantial reason.

The employer must show that one ofthese reasons existed and that it actedfairly and reasonably in deciding todismiss. The employer must therefore becareful to ensure, not only that there is apermissible statutory reason fordismissing the employee, but that a fairand reasonable procedure has beenfollowed in implementing the dismissal;this procedure must also comply withthe statutory dismissal procedure orstatutory retirement procedure in thecase of retirement.

The compensation payable if theemployer unfairly dismisses an employeeis distinct from the compensationpayable if the employer fails to complywith the notice period described above.

To qualify for statutory protection fromdismissal an employee must normallyhave at least one year’s continuousemployment.

The maximum compensation that maybe awarded for most (non-discrimination) unfair dismissal claims is£69,900 as at 1 February 2007 and thisfigure is revised annually in February.Failure to comply with the statutorydismissal and disciplinary procedure canlead to a 10-50 per cent increase to orreduction in any compensation awardeddepending on whether employer oremployee is at fault. It should be notedthat the vast majority of claims broughtbefore an Employment Tribunal aresettled before a hearing is reached.

Employment Tribunals in unfair dismissalcases have the power to orderreinstatement or re-engagement, buthistorically have tended to do so onlyoccasionally. If such an order is notcomplied with additional compensationwill be payable and the limits referred toabove do not apply to compensationawarded to an employee to cover theperiod from his or her dismissal until anyre-engagement/reinstatement order issupposed to be complied with.

13.4 Special ProtectionSpecial rules apply to dismissalsconnected with pregnancy or maternity,parental leave, health and safety,Sunday working, the duties of pensiontrustees or employee representatives,

exercising the right to take time off tostudy, asserting a statutory right, tradeunion membership or activities, transfersof undertakings, “spent” criminalconvictions, breach of the Working TimeRegulations, making a public interestdisclosure (“whistle-blowing”) and theNational Minimum Wage Act andselection for redundancy taking accountof any of these matters.

13.5 Closures and Collective DismissalsAs mentioned above, redundancyconstitutes a good statutory reason fordismissal and, although it may beapplicable to individual termination(for example, if one employee’s specificjob disappears), it is commonlyassociated with the partial or totalclosure of a business.

Redundancy is a statutorily defined termand, subject to satisfying the eligibilitycriteria (broadly speaking two years’continuous employment), an employeewill be entitled to a statutory redundancypayment. The statutory redundancypayment is calculated by reference toage and length of service and themaximum payment was £9,300 fordismissals taking effect on or after1 February 2007. The maximumpayment is revised on 1 February eachyear. In some industries there may beenhanced contractual redundancypackages available. Employers shouldtake care to comply with applicableconsultation requirements (seeInformation, Consultation andParticipation above) and to selectindividuals for redundancy in a fairmanner, since, although redundancy is apermissible statutory reason fordismissing an employee (see “Reasonsfor Dismissal” above) the employer muststill prove that he acted in a fair andreasonable manner in selecting anyparticular individual for redundancy.In the case of an individual redundancy(as opposed to a collective redundancy)situation the employer must follow thestatutory dismissal procedure to avoidthe dismissal automatically beingclassified as unfair.

An employer must comply with thecontractual notice period whenemployees are made redundant or makea payment in lieu of such notice.



204


Where 20 or more redundancies areproposed at one establishment within aperiod of 90 days, consultation withappropriate representatives must takeplace at the earliest possible opportunity.Minimum time limits for consultation arelaid down and failure to consult orcomply with the time limits gives theappropriate representatives the right tocomplain to an Employment Tribunal,which may make an award ofcompensation to employees of upto 90 days’ pay per employee.In practice unless there are exceptionalcircumstances the maximum 90 days willusually be awarded. There is no cap onthe amount that might be awarded. If theemployer is proposing to dismiss 100 ormore employees the consultationprocess must start at least 90 days’before the first dismissal takes effect.Otherwise consultation must start atleast 30 days’ before the first dismissaltakes effect. There is also an obligationto notify the Department of Trade of suchproposed redundancies prior to givingnotice and at least 30 or 90 days’ priorto the first dismissal depending on thenumbers involved. Failure to do so couldgive rise to a £5,000 fine. Injunctionscannot generally be granted to preventthe redundancies taking effect.

14. Data Protection14.1 Employment RecordsThe collection, storage and use ofinformation held by employers abouttheir employees and workers(prospective, current and past) areregulated by the Data Protection Act1998 (DPA), which implements the EUData Protection Directive. In addition aconsiderable amount of guidance hasalso been issued including theEmployment Practices Data ProtectionCode. The Code is intended to assistemployers in the understanding andimplementation of the DPA. It is notlegally binding however failure to adhereto the Code will be a factor taken intoaccount when potential breaches of theCode are being considered by theInformation Commissioner. Infringementof data protection law can lead to fines,compensation claims from affectedemployees or regulatory action.

Essentially employers, as datacontrollers, are under an obligation to

ensure that they process personal dataabout their employees (whether held onmanual files or on computer) inaccordance with specified principalsincluding the following: a requirement toensure that data is accurate, up to date,and is not kept longer than is necessaryand a requirement that it is storedsecurely to avoid unlawful access oraccidental destruction or damage to it.

Employers are generally advised toensure they have some sort ofdocument retention policy in place andto ensure that staff are aware of theirdata protection obligations.

14.2 Employee Access to DataEmployees, as data subjects, have theright to make a subject access request.This entitles them, subject to certainlimited exceptions, to be told what datais held about them, who it is disclosedto and to be provided with a copy oftheir personal data. There is a 40-daytime limit for responding to such arequest. Subject access requests coverpersonal data held in manual andelectronic records such as e-mail.Legally a charge of £10 may be levied ifa request is made, regardless of thevolume of information sought.

14.3 MonitoringThe monitoring of employee e-mail,Internet and telephone usage andClosed Circuit TV monitoring isregulated by the DPA amongst otherpieces of legislation. Monitoring ispermissible provided that it is carried outin accordance with the DPA principlesand processing conditions (and whereappropriate in accordance with anyother applicable legislation). Any adverseimpact of monitoring on employeesmust be justified by its benefit to theemployer and/or others.Express employee consent tomonitoring is not usually required,however, employees should be madeaware that monitoring is being carriedout, the purpose for which it is beingconducted and who the data will besupplied to, unless covert monitoring isjustified. Where disciplinary action is apossible consequence of anythingdiscovered this too should be madeclear to employees.


An employer who wishes to provideemployee data to third parties must doso in accordance with the DPAprinciples and processing conditions.In many cases it may be necessary toobtain express consent to suchdisclosure in the absence of a legitimatebusiness purpose for the disclosure anddepending on the nature of theinformation in question and the locationof the third party. Where the third partyis based outside the EEA it should benoted that the DPA prohibits the transferof data to a country outside the EEAunless that country ensures an adequatelevel of protection for personal data orone of a series of limited exceptionsapply. In the context of commercialtransactions where employee data isrequested care must be taken to complywith the DPA. Where possibleanonymised data should be provided,where this is not possible the recipientshould be required to undertake inwriting that it will only use it in respect ofthe transaction in question, will keep itsecure and will return or destroy it at theend of the exercise.


205

European UnionLaw1. IntroductionThe EU has the right to legislate in theemployment field in pursuit of socialpolicy and the principle of freemovement.

EU legislation can take a number offorms. Articles of the Treaty Establishingthe European Community (andsubsequent amending Treaties) andRegulations are directly applicable inMember States. Directives requireMember States to legislate throughdomestic laws or other measures toachieve the purposes directed. In theemployment field, Directives are themost usual form of legislation so that ona day-to-day basis it is still domesticlegislation and practice whichdetermines what form EU law takes ineach Member State. However, a steadystream of cases passing through theEuropean Court of Justice (ECJ) hasmade it clear that domestic Courts mustinterpret domestic legislation, whichimplements EU law, in accordance withthe intent of EU law.

The principle of free movement isrecognised by all Member States as acore concern of the EU; accordingly, theEU has been very active in legislating toimplement it. The scope for legislation inpursuance of social policy is wide, butpolitical factors have, in the past, limitedthe extent of legislative activity. The UK,in particular, opposed much legislation,but the current Labour Governmentmoved away from its predecessor’sposition so that all Member States havenow “signed up” to the “Social Chapter”of the Treaty on European Union.

When 12 new Member Statesconcluded the Treaties of Accession andjoined the EU on 1 May 2004 and1 January 2007 they all agreed toimplement existing EU employmentlegislation; however it appears that inpractice correct implementation may nothave been achieved in all cases, orundertaken at all.

2. Social ChapterThe Social Chapter is incorporated into

the Treaty of Amsterdam (whichconsolidated previous Treatymechanisms and policy) and it sets outthe objectives of the EuropeanCommunity and Member States’ jointsocial policy. These objectives are:

■ The promotion of employment;

■ The improvement of living andworking conditions;

■ Social protection;

■ The promotion of dialogue betweenmanagement and labour;

■ The development of humanresources with a view to lasting highemployment; and

■ The combating of social exclusion.

The European Commission, which hasresponsibility for initiating the legislativeprocess and suggesting proposals forlegal measures to implement thoserights within the EU’s area ofcompetency, has pursued thisresponsibility with some vigour andmany of the rights have now beenimplemented through laws, collectiveagreements or practices.The Commission’s new Social Agendawas published in February 2005. Thisagenda established a five-year plan ofaction covering the period up to 2010.The Agenda focuses on providing jobsand equal opportunities. One of themain instruments for implementing theSocial Agenda is the EuropeanEmployment Strategy (EES). In July2005, a new process for the EES cameinto practice. It introduced guidelinesintended to remain in place for threeyear cycles. The 2005-2008 guidelinesfocus on three priorities: (i) attractingand retaining more people inemployment, increasing labour supplyand modernising social protection;(ii) improving adaptability of workers andenterprises; and (iii) increasinginvestments in human capital throughbetter education and skills.

3. Social DialogueFor many years, the president of theCommission has held meetings withUNICE (Union of Industrial and

Employers’ Confederations of Europe),CEEP (representing public sectoremployers) and ETUC (the EuropeanTrade Union Confederation) in a processknown as the “social dialogue”.“Joint opinions” have been concludedon a number of issues, although theyare vague and have no binding effect.However, the Treaty Establishing theEuropean Community subscribed to byall Member States gives “socialdialogue” a legal status under whichcollective agreements can becomebinding at a European level.

4. Legal MeasuresThis section summarises the mainmeasures that are already part of EU lawin the employment field and those legalmeasures which are proposed but arenow lying dormant.

4.1 Freedom of MovementThere is a large body of EU legislationimplementing the principle of freemovement. The most important effectsof the legislation are to:

■ Enable EU nationals to work in anyMember State without the need for awork permit;

■ Co-ordinate certain aspects ofnational social security schemes;

■ Facilitate the recognition of certainqualifications between MemberStates; and

■ Ensure that employees sent fromany Member State to another towork do so on terms no lessfavourable than those applicable inthe host country.

4.2 Discrimination4.2.1 SexThe Treaty Establishing the EuropeanCommunity and the 1975 Equal PayDirective require Member States tomaintain the principle that men andwomen should receive equal pay forequal work. Decisions of the ECJ havegiven “pay” a very wide meaning.

Other Directives require the principle ofequal treatment to be observed inrelation to:

Employment and Benefits in the European UnionEuropean Union Law


206


(a) access to employment, vocationaltraining and promotion, and workingconditions; and

(b) pension schemes.

The Burden of Proof Directive is aimedat ensuring that where a complainantestablishes facts on which a claim ofsex discrimination may be presumed,the burden of proof is then placed onthe employer to demonstrate that therehas been no breach of the principle ofequal treatment.

The European Commission published aCode on The Dignity of Men AndWomen At Work aimed at combatingsexual harassment at work. The EqualTreatment Amendment Directive formallyoutlaws harassment on the grounds ofsex and incorporates the definition ofharassment used in the Code. MemberStates should have implementednational legislation to give effect to it by2005.

4.2.2 Race, Age, Religion or Belief,Disability or Sexual Orientation

The Equal Treatment Directives (alsoreferred to as the Race and FrameworkDirectives) require Member States to putin place measures that will ensure theequal treatment of individuals in theEuropean Union regardless of race orethnic origin, religion or belief, disability,age or sexual orientation in respect ofaccess to employment or occupationand membership of certainorganisations. The Directives shouldnow have been implemented byMember States, however, it appears thatthis may not have been achieved by allMember States.

Both Directives also addressharassment as a specific offence andthe continuing right to claim victimisationafter termination.

In 2005 the European Commissionproposed the establishment of aEuropean Institute for Gender Equality toassist the EU institutions and theMember States in promoting genderequality in all Community policies andfighting discrimination based on sex.It should be established in 2007.

On 1 January 2007, the EU introduced aCommunity programme for employmentand social solidarity for 2007-2013,known as PROGRESS. This programmeis intended to fund (i) analysis; (ii) mutuallearning, awareness-raising anddissemination activities; and (iii) supportfor the main players (e.g. operatingcosts of EU networks; working groups,training seminars; and the creation ofspecialist bodies at EU level) in the fieldsof employment, social inclusion andprotection, working conditions, genderequality and anti-discrimination.

4.3 Employment Protection4.3.1 Transfer of UndertakingsThe 1977 Acquired Rights Directiverequires Member States to approximatetheir laws so that the rights ofemployees are safeguarded in the eventof transfers of undertakings orbusinesses. National laws under theDirective should invalidate a transfer of abusiness as a good reason for adismissal and automatically transferemployees with the undertaking orbusiness. The Directive gave rise tointerpretation problems (there have beennumerous judgments of the ECJconcerning it), so an Amending Directivewas adopted in June 1998 but this,although it now defines a “transfer”, hasnot resolved all interpretation difficulties.The original Directive and the AmendingDirective were consolidated into a singleDirective (2001/23/EC) which took effectin April 2001.

4.3.2 InsolvencyA 1980 Directive imposes on MemberStates a duty to ensure that in the eventof an employer’s insolvency, “guaranteeinstitutions” meet employee claimswhere necessary. This was amended byanother Directive (2002/74/EC) whichtook should have been implemented byMember States by 7 October 2005.This extends the protection afforded toemployees in the event of theiremployer’s insolvency by expanding thedefinition of “insolvency” to includesituations other than liquidations andensuring that atypical workers are alsocovered.

4.3.3 Atypical EmploymentPart-time, fixed-term and temporaryemployment are classed by the

Commission as “atypical”. Directiveshave been adopted in relation to this,including the Part-Time WorkersDirective which had to be transposedinto national legislation by 15 December1999 (7 April 2000 in the case of theUK). This ensures that part-time workersare entitled to equal or pro-ratatreatment with regard to all terms andconditions of employment relative to a“comparable full-time worker”.

A Directive on fixed-term work wassubsequently adopted to provideprotection for those employees workingunder fixed-term contracts. It providesthat employers must ensure that fixed-term employees are treated no lessfavourably than comparable permanentemployees. A limit on the number ofconsecutive fixed-term contracts andthe maximum duration of successivecontracts is imposed in order to preventabuse of successive fixed-termcontracts. The Directive had to beimplemented in Member States by July2001.

No progress has been made on theproposals for a Temporary WorkersDirective, providing temporary agencyworkers, after six weeks’ work, with theright to the same remuneration and tobe treated no less favourably than long-term employees doing comparable jobsin the user undertaking. Discussionsmay however be revived by incomingpresidencies.

4.3.4 Proof of EmploymentA Directive on written proof ofemployment relationships requiresemployers to inform employees of theterms and conditions applicable to theiremployment. Member States shouldnow have implemented this Directive.

4.3.5 Pregnant Women and ParentalLeave

In October 1992, a Directive wasadopted to give 14 weeks’ paidmaternity leave, protection againstdismissal on grounds of pregnancy andto impose strict duties in respect of thehealth and safety of pregnant women,women who have given birth or who arebreastfeeding. Member States wererequired to comply with the Directive byOctober 1994.


207

The Parental Leave Directive grantsthree months’ parental leave to men andwomen. This should also now havebeen implemented by all MemberStates.

4.3.6 Working TimeThe Working Time Directive of 2003consolidates earlier directives andregulates working time including theaverage working week which it fixes at amaximum of 48 hours. This Directivemade special provisions for certaineconomic sectors e.g. mobile workers,and there are also a number ofadditional Directives which deal withthese economic sectors. This Directivewas effective as of 2 August 2004 andshould have been implemented inMember States except in relation toprovisions covering doctors in training.A transitional period of five years from1 August 2004 was allowed for theimplementation of provisions relating todoctors in training.

In September 2004, the Commissionannounced its proposals for themodification of the Working TimeDirective provisions to make opt-outsfrom the maximum weekly working timeof 48 hrs subject to collectiveagreements; to insert definitions relatingto on-call time; and allow an extensionby the Member States of the referenceperiod for calculating the maximumworking week from four months to oneyear. A number of attempts have beenmade to reach agreement at a Europeanlevel on these proposed modificationswithout any success to date.

4.3.7 Equitable WageThe Commission has adopted anOpinion on the introduction of anequitable wage by Member States, butthis has no binding legal effect.

4.3.8 Protection of Young People atWork

A Directive on the protection of youngpeople at work includes restrictions onworking time and provides for specialhealth and safety protection for workersunder the age of 18.

4.4 Information and Consultation4.4.1 Collective RedundanciesThe Collective Redundancies Directive

requires employers who arecontemplating collective redundancies toinform and consult employeerepresentatives and to notify the publicauthorities.

4.4.2 Transfers of UndertakingsThe Acquired Rights Directive (alreadyreferred to above) also requiresemployers to give employeerepresentatives information aboutproposed transfers and, in certainsituations, to consult them as well.

4.4.3 Health and SafetyThe Health and Safety FrameworkDirective gives those employeerepresentatives with specificresponsibility for health and safetymatters information rights on risk andconsultation rights on all health andsafety issues.

4.4.4 European Company Statute andWorker Involvement Directive

In October 2001, the Council ofMinisters of the European Union formallyadopted legislation in relation to theestablishment of a European Company,to be known by its Latin name of“Societas Europeae” (“SE”). TheEuropean Company Statute isestablished by two pieces of legislation;a Regulation directly applicable inMember States establishing thecompany law rules and a Directive onWorker Involvement. This should havebeen implemented by Member Statesby 8 October 2004.

The legislation gives companies theoption of forming a SE which will beable to operate on a European-widebasis and be governed by communitylaw directly applicable in all MemberStates. The SE will be able to operatethroughout the EU with one set of rulesand a unified management and reportingsystem rather than having to complywith the various national laws of eachMember State where it has subsidiaries.

The Directive on Worker Involvementstipulates that upon the creation of aEuropean Company, negotiations mustbe initiated with a special negotiatingbody representing the employees with aview to reaching agreement on theinvolvement of all employees of the SE’s

constituent companies in arepresentative body. If a mutuallysatisfactory arrangement cannot benegotiated, the Directive contains a setof “standard rules” in its annex thatwould apply instead. These measuresessentially oblige managers of the SE toprovide regular reports on the basis ofwhich there must be regular consultationof, and information to, a bodyrepresenting the companies’ employees.Employees also have Board participationrights in certain circumstances. Thecompanies’ current and future businessplans, production and sales levels,implications of these for the workforce,management changes, mergers,divestments, potential closures and lay-offs must be included in such reports.

Employment contracts and pensions arenot covered by the European CompanyStatute; they are subject to the nationallaw of each Member State within whichthe headquarters and branches areoperated.

4.4.5 European Works CouncilsA European Works Councils Directivewas adopted in 1994. This should nowhave been implemented by MemberStates. This Directive concerns theestablishment of a European WorksCouncil or a procedure in Community-scale undertakings, and Community-scale groups of undertakings, for thepurpose of informing and consultingemployees regarding business decisionsmade in one country covered by theDirective which affect the employeesand impact on their interests in anothercountry covered by the Directive. TheDirective defines a community scaleundertaking as an undertaking with atleast 1,000 employees within MemberStates, and, at least 150 employees intwo or more Member States.Companies in those countries that arenot covered by the Directive, forexample American companies, will bebound by it in their divisions located incountries that have adopted theprovisions of the Directive if they meetthe threshold number of employees.The Directive provides that the nature,composition, competence andfunctioning of the Council must normallybe agreed between central managementand a special negotiating body drawn



208


from employee representatives. In caseno agreement can be reached, theDirective lays down minimumrequirements to be complied with.

The European Economic and SocialCommittee on European Works Councilissued an opinion (2006/C318/25) in late2006 proposing that following areasonable period of integration for thenew Member States that the EuropeanWorks Council Directive should bereviewed to take into account a numberof legal and practical problemsincluding: an adjustment to the numberof workers representatives to take intoaccount EU enlargement and arecognition of national and Europeantrade unions to belong to EuropeanWorks Councils, the adjustment ofexisting agreements to reflect changesto the groups of companies, theprovision of deterrents for companies fornon-compliance with the Directive.

4.4.6 National Information andConsultation

The Employee Information andConsultation Directive aims to ensurethat workers are adequately informedand consulted before serious decisionsaffecting them are taken. Employeeshave a right to be informed andconsulted beyond consultation aboutredundancies and transfers ofundertakings on more general issuessuch as the undertaking’s activities andeconomic situation. The Directive allowsMember States to limit the informationand consultation obligations ofundertakings with fewer then 50 or20 employees. The deadline forimplementation of the Directive was23 March 2005 for some MemberStates and 23 March 2007 for others;although the UK and Ireland have beenallowed to restrict the initial applicationof the Directive to businesses with150 or more employees, with fullimplementation being delayed untilMarch 2008.

4.4.7 Takeover BidsA Directive on Takeover Bids wasadopted on 21 April 2004. The mainthrust of the Directive is to giveemployees information and consultationrights in company takeover bidsituations. When an offer document is

made public, the Boards of the offereeCompany and offeror mustcommunicate it to the representatives oftheir respective employees or, wherethere are no such representatives, to theemployees themselves. Member Statesshould have implemented the Directiveby 20 May 2006.

4.4.8 TeleworkingA framework agreement on teleworkwas formally signed in July 2002 andshould have been implemented bymember states by July 2005. It laysdown a general framework of rights andprotections for teleworkers(homeworkers) including provision forworkers’ representatives to be informedand consulted on the introduction ofteleworking.

4.5 Health and SafetyWorkplace health and safety has beenan important area of EU legislativeactivity. National variations in workplacehealth and safety rules have beengenerally recognised as possibleobstacles to the proper development ofa free market. This has encouraged theCommission to make proposals, andthere are a substantial number ofDirectives in this area. These range fromDirectives laying down general healthand safety management principles (the“Framework Directive”) to Directivesaimed at specific industries or activities.The Working Time Directive is a healthand safety Directive.


209

Employment and Benefits in the European UnionAppendix


210

Min

imum

Wag

e

Max

imum

Wee

kly

Ho

urs

Ho

liday

Ent

itle

men

t**

Mat

erni

ty a

nd F

amily

Le

ave

Ent

itle

men

t

Min

imum

No

tice

by

Em

plo

yer

and

Te

rmin

atio

n P

aym

ents

Aus

tria

•N

o st

atut

ory

min

imum

wag

e

•Fi

xed

by c

olle

ctiv

e ag

reem

ent

•40

hou

rs

•O

ften

redu

ced

by c

olle

ctiv

e ag

reem

ent

to38

.5ho

urs

•M

inim

um 3

0 da

ys (6

day

wee

k)

•16

wee

ks’ m

ater

nity

leav

e

•P

ay 1

00%

ord

inar

y (la

st 1

3 w

eeks

) net

dai

ly p

aypa

yabl

e by

soc

ial s

ecur

ity

•Tw

o ye

ars’

unp

aid

pare

ntal

leav

e

•C

hild

Car

e B

enef

it (“

Kin

derb

etre

uung

sgel

d”) f

or a

max

imum

of u

p to

3 y

ears

pay

able

to

mot

her

orfa

ther

•W

hite

col

lar

empl

oyee

s: s

ix w

eeks

’ to

five

mon

ths’

not

ice

(dep

endi

ng o

n le

ngth

of s

ervi

ce)

at t

he e

nd o

f a q

uart

er o

r on

15t

h or

last

day

of

the

mon

th b

y ag

reem

ent

•B

lue

colla

r em

ploy

ees:

14

days

’ not

ice.

Col

lect

ive

agre

emen

ts p

rovi

de fo

r di

ffere

ntno

tices

.

•S

ever

ance

pay

of t

wo

to 1

2 m

onth

s’ p

ayde

pend

ing

on le

ngth

of s

ervi

ce fo

r al

l em

ploy

ees

•E

ntitl

emen

t on

ly a

rises

afte

r th

ree

year

s’ s

ervi

ce

•N

ew s

ever

ance

sch

eme

appl

ies

if em

ploy

men

tco

ntra

ct c

oncl

uded

afte

r 31

.12.

02 (C

ontr

ibut

ions

of 1

.53

per

cent

of m

onth

ly r

emun

erat

ion

paid

to

a fu

nd a

nd t

he e

mpl

oyee

may

rec

eive

the

bala

nce

on t

erm

inat

ion)

Bel

giu

m

•M

inim

um w

age

set

by n

atio

nal c

olle

ctiv

e la

bour

agre

emen

t bi

ndin

g on

all

empl

oyer

s

•38

hou

rs

•U

sual

ly r

educ

ed b

y co

llect

ive

agre

emen

t

•M

inim

um 2

0 da

ys (f

ive

day

wee

k) a

nd h

olid

aybo

nus

•15

wee

ks’ m

ater

nity

leav

e

•P

ay*:

82%

of g

ross

sal

ary

(unc

appe

d) fo

r th

efir

st 3

0 da

ys a

nd 7

5% o

f dai

ly g

ross

sal

ary

(up

to a

cei

ling

of c

82.1

7) fo

r re

mai

ning

per

iod

•Th

ree

mon

ths’

pare

ntal

leav

e

•W

hite

col

lar

empl

oyee

s: m

inim

um t

hree

mon

ths’

notic

e pe

r fiv

e ye

ars’

ser

vice

•E

mpl

oyee

s ea

rnin

g m

ore

than

c28

,093

pa

notic

eis

dep

ende

nt o

n ag

e, s

ervi

ce a

nd s

alar

y

•B

lue

colla

r em

ploy

ees:

35

to 1

12 d

ays’

not

ice

depe

ndin

g on

leng

th o

f ser

vice

(sec

tora

lco

llect

ive

agre

emen

t m

ay in

crea

se n

otic

e)

•C

ompe

nsat

ion

paya

ble

if em

ploy

er o

pts

to g

ive

no/s

hort

not

ice

Bul

gar

ia

•B

GN

180

per

mon

th (5

day

wee

k)

•B

GN

0.9

5 pe

r ho

ur

•40

hou

rs

•M

inim

um 2

0 da

ys

•31

5 da

ys p

regn

ancy

and

chi

ldbi

rth

leav

e

•P

ay: 9

0% o

f ave

rage

rem

uner

atio

n

•6

mon

ths’

pai

d ch

ildca

re le

ave

in r

espe

ct o

ffo

urth

chi

ld o

nwar

ds

•M

inim

um 3

0 da

ys’ n

otic

e

•Lo

nger

not

ice

up t

o 3

mon

ths

by m

utua

lco

nsen

t

* P

rovi

ded

by t

he S

tate

and

by

the

empl

oyer

by

law

and

/or

colle

ctiv

e ag

reem

ent

** E

xclu

sive

of p

ublic

or

relig

ious

hol

iday

sN

ote:

the

con

tent

s of

thi

s ta

ble

prov

ide

a br

oad

over

view

onl

y, fo

r gr

eate

r de

tail

plea

se s

ee t

he r

elev

ant

sect

ion

of t

he G

uide

.

App

endi

x C

ount

ry b

y C

ount

ry C

ompa

rison

s



211

Min

imum

Wag

e

Max

imum

Wee

kly

Ho

urs

Ho

liday

Ent

itle

men

t**

Mat

erni

ty a

nd F

amily

Leav

e E

ntit

lem

ent

Min

imum

No

tice

by

Em

plo

yer

and

Ter

min

atio

nP

aym

ents

The

Cze

ch R

epub

lic

•S

tatu

tory

min

imum

wag

e: C

ZK 8

,000

(app

rox.

c28

0) p

er m

onth

or

CZK

48.

10 (a

ppro

x. c

1.70

)pe

r ho

ur, b

ased

on

a 40

-hou

r w

eek

•48

hou

rs p

er w

eek

(40

hour

s of

sta

ndar

d w

eekl

yho

urs

+ e

ight

hou

rs o

f ove

rtim

e) a

vera

ged

over

are

fere

nce

perio

d of

26

or 5

2w

eeks

if a

gree

d in

aco

llect

ive

agre

emen

t (u

pto

one

yea

r)

•O

ften

redu

ced

by c

olle

ctiv

e ag

reem

ents

•M

inim

um fo

ur w

eeks

, fiv

e w

eeks

for

empl

oyee

sof

sta

te b

odie

s (s

even

day

wee

k)

•28

wee

ks’ m

ater

nity

leav

e, 3

7 w

eeks

if t

hem

othe

r ga

ve b

irth

to m

ore

than

one

chi

ld

•S

tatu

tory

Mat

erni

ty P

ay a

nd o

ther

ben

efits

paya

ble

by s

ocia

l sec

urity

•U

npai

d pa

rent

al le

ave

until

the

chi

ld r

each

esth

ree

year

s of

age

•A

ll em

ploy

ees:

at

leas

t tw

o m

onth

s’ n

otic

e,de

pend

ing

on t

he r

easo

ns fo

r di

smis

sal

•A

ll em

ploy

ees:

sta

tuto

ry e

ntitl

emen

t to

redu

ndan

cy p

aym

ent

in a

n am

ount

equ

al t

o th

eem

ploy

ee’s

ave

rage

sal

ary

for

a pe

riod

of t

hree

mon

ths,

als

o pa

yabl

e by

mut

ual a

gree

men

tco

nclu

ded

on t

erm

inat

ion

of e

mpl

oym

ent

base

don

sel

ecte

d st

atut

ory

term

inat

ion

reas

ons

•C

ompe

nsat

ion

for

unfa

ir di

smis

sal:

com

pens

atio

n fo

r w

ages

and

ben

efits

whi

ch t

heem

ploy

ee w

ould

hav

e re

ceiv

ed if

the

empl

oym

ent

had

cont

inue

d or

dur

ing

the

rele

vant

not

ice

perio

din

the

cas

e of

law

ful

term

inat

ion

Cyp

rus

•C

Y £

320

per

mon

th fo

r of

fice

cler

ks a

nd s

hop

assi

stan

ts –

ris

ing

to C

Y £

340

afte

r 6

mon

ths’

empl

oym

ent

•48

hou

rs

•20

or

24 d

ays

depe

ndin

g on

leng

th o

f wor

king

wee

k

•16

wee

ks’p

aid

mat

erni

ty le

ave

paya

ble

by t

heD

epar

tmen

t of

Soc

ial S

ecur

ity a

t a

rate

of 7

5%of

the

em

ploy

ee’s

ave

rage

sal

ary

of t

hepr

eced

ing

year

•13

wee

ks’ u

npai

d pa

rent

al le

ave

for

each

par

ent

•7

days

’unp

aid

emer

genc

y le

ave

per

annu

m

•O

ne t

o ei

ght

wee

ks’ p

aid

notic

e de

pend

ing

onle

ngth

of s

ervi

ce

•Tw

o w

eeks

’ to

two

year

s’ w

ages

dep

endi

ng o

na

num

ber

of fa

ctor

s

Den

mar

k

•N

o st

atut

ory

min

imum

wag

e, b

ut m

inim

um w

age

set

by c

olle

ctiv

e ag

reem

ent

for

a la

rge

perc

enta

ge o

f the

wor

kfor

ce; o

ther

em

ploy

ees

rece

ive

cust

omar

y w

age

for

indu

stry

sec

tor

•48

hou

rs o

n av

erag

e

•G

ener

ally

red

uced

by

colle

ctiv

e ag

reem

ent

to37

hour

s

•Fi

ve w

eeks

and

hol

iday

sup

plem

ent

•4

wee

ks’ p

regn

ancy

leav

e be

fore

birt

h

•U

p to

14

wee

ks’ m

ater

nity

leav

e af

ter

birt

h

•Tw

o w

eeks

’pat

erni

ty le

ave

afte

r bi

rth

•32

-46

wee

ks’ p

aren

tal l

eave

for

each

par

ent

•P

ay*:

50%

of s

alar

y du

ring

preg

nanc

y an

dm

ater

nity

leav

e fo

r sa

larie

d em

ploy

ees

•Fu

ll or

par

tial s

alar

y fo

r up

to

14 w

eeks

for

blue

colla

r em

ploy

ees

•R

emai

ning

leav

e is

unp

aid

•U

sual

ly 1

4 to

120

day

s’ n

otic

e fo

r w

orke

rs

•O

ne m

onth

’s n

otic

e fo

r sa

larie

d em

ploy

ee w

ithon

e to

six

mon

ths’

ser

vice

•S

ix m

onth

s’ n

otic

e af

ter

nine

yea

rs’ s

ervi

ce

•O

ne, t

wo

and

thre

e m

onth

s’ s

alar

y fo

r sa

larie

dem

ploy

ees

with

12,

15,

and

18

year

s’ s

ervi

cere

spec

tivel

y

* P

rovi

ded

by t

he S

tate

and

by

the

empl

oyer

by

law

and

/or

colle

ctiv

e ag

reem

ent

** E

xclu

sive

of p

ublic

or

relig

ious

hol

iday

sN

ote:

the

con

tent

s of

thi

s ta

ble

prov

ide

a br

oad

over

view

onl

y, fo

r gr

eate

r de

tail

plea

se s

ee t

he r

elev

ant

sect

ion

of t

he G

uide

.



212

Min

imum

Wag

e

Max

imum

Wee

kly

Ho

urs

Ho

liday

Ent

itle

men

t**

Mat

erni

ty a

nd F

amily

Leav

e E

ntit

lem

ent

Min

imum

No

tice

by

Em

plo

yer

and

Ter

min

atio

nP

aym

ents

Est

oni

a

•E

EK

21.

50 p

er h

our

(200

7)

•40

hou

rs p

er w

eek

•28

cal

enda

r da

ys

•14

0 da

ys’m

ater

nity

leav

e

•M

ater

nity

pay

equ

al t

o th

e av

erag

e da

ily in

com

e

•P

aren

tal b

enef

it pa

id a

fter

mat

erni

ty le

ave

•14

cal

enda

r da

ys’u

npai

d pa

tern

ity le

ave

•M

ater

nity

leav

e an

d pa

rent

al b

enef

it up

to

am

axim

um o

f 455

day

s

•N

one/

two

wee

ks t

o fo

ur m

onth

s’ n

otic

ede

pend

ing

on g

roun

ds fo

r te

rmin

atio

n

•Fu

ll pa

y ov

er n

otic

e pe

riod

•C

ompe

nsat

ion

of u

p to

4 m

onth

s’ a

vera

gesa

lary

if n

otic

e pe

riod

not

adhe

red

to

Finl

and

•N

o st

atut

ory

min

imum

wag

e

•M

inim

um w

ages

set

or

influ

ence

d by

sec

tora

lco

llect

ive

agre

emen

t

•U

sual

ly 4

0 ho

urs

•G

ener

ally

red

uced

by

colle

ctiv

e ag

reem

ent

•Fo

ur t

o fiv

e w

eeks

•H

olid

ay b

onus

usu

al b

ut n

ot s

tatu

tory

•10

5 da

ys’ m

ater

nity

leav

e (in

clud

ing

Sat

urda

ys)

•15

8 da

ys’ p

aren

tal l

eave

(inc

ludi

ng S

atur

days

)

•P

ay: a

vera

ge 6

5% o

f gro

ss s

alar

y pa

id b

y S

ocia

lS

ecur

ity d

urin

g m

ater

nity

and

/or

pare

ntal

leav

e

•In

gen

eral

, col

lect

ive

barg

aini

ng a

gree

men

tsin

clud

e an

ent

itlem

ent

to fu

ll sa

lary

dur

ing

the

first

mon

th o

f the

mat

erni

ty le

ave

to b

e pa

id b

yth

e em

ploy

er

•18

day

s’ p

ater

nity

leav

e

•P

ay: a

vera

ge 6

5% g

ross

sal

ary

paid

by

Soc

ial

Sec

urity

•U

npai

d pa

rent

al le

ave

until

chi

ld is

thr

ee y

ears

old

•14

day

s to

six

mon

ths’

not

ice

depe

ndin

g on

leng

th o

f ser

vice

, unl

ess

othe

rwis

e ag

reed

•C

ompe

nsat

ion

of 3

to

24 m

onth

s’ s

alar

y on

ly in

case

of u

nlaw

ful t

erm

inat

ion

Fran

ce

•S

tatu

tory

min

imum

wag

e (S

MIC

)

•1

July

200

6: c

8.27

per

hou

r, i.e

. c1,

254.

28 p

erm

onth

bas

ed o

n a

35 h

our

per

wee

k

•D

ue t

o ch

ange

Jul

y 20

07

•10

hou

rs p

er d

ay, o

r 48

hou

rs p

er w

eek

or a

nav

erag

e 44

hou

rs p

er w

eek

in a

12

wee

k pe

riod

•Fi

ve w

eeks

•16

wee

ks’ m

ater

nity

leav

e

•P

ay*:

80.

32%

of s

alar

y up

to

a ce

iling

paid

by

Soc

ial S

ecur

ity

•Th

ree

days

’ birt

h pa

tern

ity le

ave

on fu

ll pa

y

•11

day

s’ u

npai

d pa

tern

ity le

ave

•Th

ree

year

s’ u

npai

d pa

rent

al le

ave

•S

ix m

onth

s’ t

o tw

o ye

ars’

ser

vice

– u

sual

ly o

nem

onth

. Abo

ve t

wo

year

s’ s

ervi

ce –

tw

o m

onth

’sno

tice

•E

xecu

tives

– t

hree

mon

ths’

not

ice

•1/

10th

of m

onth

ly s

alar

y fo

r ea

ch y

ear

of s

ervi

ceaf

ter

two

year

s’ s

ervi

ce p

lus

1/15

th o

f mon

thly

sala

ry fo

r ea

ch y

ear

of s

ervi

ce b

eyon

d 10

yea

rs’

serv

ice

* P

rovi

ded

by t

he S

tate

and

by

the

empl

oyer

by

law

and

/or

colle

ctiv

e ag

reem

ent

** E

xclu

sive

of p

ublic

or

relig

ious

hol

iday

sN

ote:

the

con

tent

s of

thi

s ta

ble

prov

ide

a br

oad

over

view

onl

y, fo

r gr

eate

r de

tail

plea

se s

ee t

he r

elev

ant

sect

ion

of t

he G

uide

.



213

Min

imum

Wag

e

Max

imum

Wee

kly

Ho

urs

Ho

liday

Ent

itle

men

t**

Mat

erni

ty a

nd F

amily

Leav

e E

ntit

lem

ent

Min

imum

No

tice

by

Em

plo

yer

and

Ter

min

atio

nP

aym

ents

Ger

man

y

•N

o st

atut

ory

min

imum

wag

e; m

inim

um w

ages

set

or in

fluen

ced

by s

ecto

ral/r

egio

nal c

olle

ctiv

eag

reem

ent

•48

hou

rs (s

ix d

ay w

eek)

but

max

10

hour

s pe

rda

y

•O

ften

redu

ced

by c

olle

ctiv

e ag

reem

ent

to35

-371 / 2

hour

s pe

r w

eek

•M

inim

um 4

wee

ks

•U

sual

ly u

p to

30

days

•14

wee

ks’ m

ater

nity

leav

e

•P

ay*:

100

% u

sual

net

dai

ly p

ay

•Th

ree

year

s’ u

npai

d pa

rent

al le

ave

per

child

for

mot

her

and/

or fa

ther

•R

ight

to

part

-tim

e em

ploy

men

t du

ring

pare

ntal

leav

e

•U

p to

tw

o ye

ars’

ser

vice

-fo

ur w

eeks

’ not

ice

toth

e 15

th d

ay o

r en

d of

the

cal

enda

r m

onth

•U

p to

20

year

s’ s

ervi

ce -

notic

e is

on

a sl

idin

gsc

ale

of o

ne t

o se

ven

mon

ths’

not

ice

to t

he e

ndof

a c

alen

dar

mon

th

•G

ener

ally,

no

stat

utor

y re

dund

ancy

pay

men

t(u

nles

s re

quire

d un

der

colle

ctiv

e ba

rgai

ning

agre

emen

t or

soc

ial p

lan)

Gre

ece

•M

inim

um w

age

set

by c

olle

ctiv

e ag

reem

ent

•U

nski

lled

and

unm

arrie

d ad

ults

with

less

tha

nth

ree

year

s se

rvic

e ha

ve a

min

imum

mon

thly

sala

ry o

f c65

7.89

/min

imum

dai

ly w

age c29

.39

•40

hou

rs

•R

educ

ed b

y co

llect

ive

agre

emen

t to

37-

40ho

urs

in c

erta

in c

ases

(ban

ks e

tc)

•20

day

s (5

day

wee

k)

•In

crea

sed

with

sen

iorit

y up

to

25 d

ays

(five

day

wee

k) o

r 30

day

s (s

ix d

ay w

eek)

•17

wee

ks’ m

ater

nity

leav

e

•P

ay*

50%

of n

otio

nal s

alar

y by

soc

ial f

und,

bala

nce

of n

orm

al s

alar

y pa

yabl

e by

em

ploy

erfo

r 15

or

30 d

ays

•Th

erea

fter,

paid

by

stat

e

•Th

ree

and

a ha

lf m

onth

s’ u

npai

d pa

rent

al le

ave

•W

hite

col

lar

empl

oyee

s: o

ne t

o 24

mon

ths’

notic

e an

d 50

% o

f the

sal

ary

due

in n

otic

epe

riod

•B

lue

colla

r em

ploy

ees:

five

to

160

days

’ pay

Hun

gar

y

•S

tatu

tory

min

imum

wag

e

•In

200

7: H

UF

65,5

00 (a

ppro

x. c

250)

for

full-

time

empl

oyee

s

•40

hou

rs (4

8 an

d 60

hou

rs in

cer

tain

circ

umst

ance

s)

•20

to

30 d

ays

depe

ndin

g on

the

em

ploy

ee’s

age

•24

wee

ks’ m

ater

nity

leav

e

•S

tate

ben

efits

: 70%

of s

alar

y

•Fa

mily

leav

e fo

llow

ing

mat

erni

ty le

ave

until

the

child

rea

ches

the

age

of t

hree

•S

tate

ben

efits

: 70%

of s

alar

y up

to

a ce

iling

ofH

UF

91,7

00 (a

ppro

x. c

350)

in 2

007

until

the

child

rea

ches

the

age

of 2

•30

to

90 d

ays’

not

ice

depe

ndin

g on

leng

th o

fse

rvic

e

•If

notic

e pe

riod

is a

pplic

able

, ful

l pay

ove

r th

eno

tice

perio

d, a

nd a

vera

ge s

alar

y fo

r th

e te

rmw

hen

the

empl

oyee

is e

xem

pted

from

wor

k

•C

ompe

nsat

ion

for

unus

ed h

olid

ays

•O

ne t

o si

x m

onth

s’ p

ay d

epen

ding

on

leng

th o

fse

rvic

e (e

mpl

oyee

s cl

ose

to r

etire

men

t ag

e ar

een

title

d to

add

ition

al t

hree

mon

ths’

pay

)

* P

rovi

ded

by t

he S

tate

and

by

the

empl

oyer

by

law

and

/or

colle

ctiv

e ag

reem

ent

** E

xclu

sive

of p

ublic

or

relig

ious

hol

iday

sN

ote:

the

con

tent

s of

thi

s ta

ble

prov

ide

a br

oad

over

view

onl

y, fo

r gr

eate

r de

tail

plea

se s

ee t

he r

elev

ant

sect

ion

of t

he G

uide

.



214

Min

imum

Wag

e

Max

imum

Wee

kly

Ho

urs

Ho

liday

Ent

itle

men

t**

Mat

erni

ty a

nd F

amily

Leav

e E

ntit

lem

ent

Min

imum

No

tice

by

Em

plo

yer

and

Ter

min

atio

nP

aym

ents

Irel

and

•S

tatu

tory

min

imum

wag

e of

c8.

30 p

er h

our

•M

inim

um p

ay le

vels

exi

st in

cer

tain

indu

strie

s

•48

hou

rs

•O

ften

redu

ced

by c

olle

ctiv

e ag

reem

ent

to 3

5 to

39 h

ours

•20

day

s

•42

wee

ks’ m

ater

nity

leav

e

•S

tate

ben

efits

: 80%

of s

alar

y up

to

ceilin

g(p

ayab

le d

urin

g fir

st 2

6 w

eeks

)

•40

wee

ks’ a

dopt

ive

leav

e (p

ayab

le d

urin

g th

efir

st 2

4 w

eeks

)

•14

wee

ks’ u

npai

d pa

rent

al le

ave

per

child

•O

ne t

o ei

ght

wee

ks’ n

otic

e de

pend

ing

on le

ngth

of s

ervi

ce

•S

tatu

tory

ent

itlem

ent

to r

edun

danc

y pa

ymen

t

•C

ompe

nsat

ion

for

unfa

ir di

smis

sal u

p to

tw

oye

ars’

rem

uner

atio

n; o

r

•D

amag

es fo

r w

rong

ful b

reac

h of

con

trac

t

Ital

y

•N

o st

atut

ory

min

imum

wag

e

•C

onst

itutio

nal r

ight

to

fair

pay

•M

inim

um le

vel o

f wag

es a

nd b

enef

its p

rovi

ded

by c

olle

ctiv

e ag

reem

ent

•Th

e av

erag

e du

ratio

n of

wor

king

hou

rs c

anno

tex

ceed

a m

axim

um o

f 48

hour

s in

any

sev

enda

y pe

riod,

incl

udin

g ov

ertim

e

•N

orm

al w

orki

ng h

ours

40

hour

s

•G

ener

ally

red

uced

by

colle

ctiv

e ag

reem

ent,

atlo

cal l

evel

to

less

tha

n 40

hou

rs

•Fo

ur w

eeks

•M

ore

gene

rous

arr

ange

men

ts m

ay b

e ag

reed

by

colle

ctiv

e ag

reem

ents

•G

ener

ally

tw

o m

onth

s’ m

ater

nity

leav

e be

fore

and

thre

e m

onth

s’ le

ave

afte

r bi

rth

•S

tate

ben

efits

: 80%

of s

alar

y

•10

mon

ths’

par

tly-p

aid

pare

ntal

leav

e

•N

otic

e pe

riod

for

blue

and

whi

te-c

olla

rem

ploy

ees

may

var

y fro

m o

ne m

onth

up

to t

hree

mon

ths

depe

ndin

g on

the

NC

LA, s

enio

rity

and

leng

th o

f ser

vice

•U

p to

12

mon

ths’

not

ice

for

exec

utiv

es (D

irige

nti)

Latv

ia

•LV

L 0.

731

per

hour

•40

hou

rs p

er w

eek

•Fo

ur w

eeks

’ pai

d le

ave

•11

2 da

ys p

aid

mat

erni

ty le

ave

•S

tate

mat

erni

ty p

ay o

f 100

% o

f ave

rage

mon

thly

earn

ings

•10

day

s’pa

id p

ater

nity

leav

e

•S

tate

pat

erni

ty p

ay o

f 80%

of a

vera

ge m

onth

lyea

rnin

gs

•10

day

s’pa

id p

ater

nity

/ado

ptio

n le

ave

•11 / 2

year

s’ c

hild

care

leav

e

•70

% o

f ave

rage

gro

ss s

alar

y is

pai

d du

ring

child

care

leav

e

•N

one/

10 d

ays’

/1 m

onth

’s n

otic

e de

pend

ing

ongr

ound

s fo

r di

smis

sal

•E

mpl

oyee

is e

ntitl

ed t

o fu

ll pa

y du

ring

notic

epe

riod

* P

rovi

ded

by t

he S

tate

and

by

the

empl

oyer

by

law

and

/or

colle

ctiv

e ag

reem

ent

** E

xclu

sive

of p

ublic

or

relig

ious

hol

iday

sN

ote:

the

con

tent

s of

thi

s ta

ble

prov

ide

a br

oad

over

view

onl

y, fo

r gr

eate

r de

tail

plea

se s

ee t

he r

elev

ant

sect

ion

of t

he G

uide

.



215

Min

imum

Wag

e

Max

imum

Wee

kly

Ho

urs

Ho

liday

Ent

itle

men

t**

Mat

erni

ty a

nd F

amily

Leav

e E

ntit

lem

ent

Min

imum

No

tice

by

Em

plo

yer

and

Ter

min

atio

nP

aym

ents

Lith

uani

a

•LT

L 3.

65 p

er h

our

•40

hou

rs p

er w

eek

•28

cal

enda

r da

ys

•12

6 da

ys’ p

aid

preg

nanc

y an

d ch

ildbi

rth

leav

e

•O

ne m

onth

s’ p

aid

pate

rnity

leav

e

•14

cal

enda

r da

ys’u

npai

d pa

rent

al le

ave

per

year

•U

p to

3 y

ears

’pat

erni

ty (m

ater

nity

) lea

ve, 8

5% o

fav

erag

e m

onth

ly s

alar

y is

pai

d un

til t

he c

hild

is 1

•G

ener

ally,

tw

o m

onth

s’ n

otic

e (fo

ur m

onth

s in

spec

ified

cas

es)

•Fu

ll pa

y ov

er n

otic

e pe

riod

Luxe

mb

our

g

•S

tatu

tory

min

imum

wag

e

•A

s at

Jan

uary

200

7: c

1,57

0.28

per

mon

th fo

rem

ploy

ees

over

18/

c1,

884.

34 fo

r qu

alifi

edw

orke

rs

•40

hou

rs

•25

day

s (fi

ve d

ay w

eek)

•16

wee

ks’ m

ater

nity

leav

e

•S

tate

ben

efits

: 100

% o

f sal

ary

up t

o a

ceilin

gw

ith m

inim

um o

f tw

o th

irds

of s

alar

y

•S

ix m

onth

s’ u

npai

d pa

rent

al le

ave

per

child

(sta

te in

dem

nity

is p

ayab

le)

•Tw

o to

six

mon

ths’

not

ice

depe

ndin

g on

leng

thof

ser

vice

•O

ne t

o 12

mon

ths’

pay

dep

endi

ng o

n le

ngth

of

serv

ice

(for

whi

te c

olla

r w

orke

rs)

•O

ne t

o th

ree

mon

ths’

pay

dep

endi

ng o

n le

ngth

of s

ervi

ce (f

or b

lue

colla

r w

orke

rs)

Mal

ta

•N

atio

nal m

inim

um w

age

of L

M 5

9.63

per

wee

k(L

M 5

6.72

per

wee

k in

the

cas

e of

you

ng p

eopl

ean

d tr

aine

es a

ged

17 a

nd L

M 5

5.50

per

wee

k in

the

case

of y

oung

peo

ple

and

trai

nees

age

d 16

and

youn

ger).

•48

hou

rs p

er w

eek

aver

aged

ove

r a

refe

renc

epe

riod

rang

ing

from

17

to 5

2 w

eeks

.A

nin

divi

dual

opt

-out

is a

lso

poss

ible

.

•M

inim

um fo

ur w

eeks

and

four

day

s ex

clud

ing

natio

nal a

nd p

ublic

hol

iday

s

•14

wee

ks’m

ater

nity

leav

e

•10

0% o

rdin

ary

pay

for

13 w

eeks

and

one

wee

kun

paid

•S

peci

al le

ave

(8 w

eeks

with

nom

inal

pay

men

tde

term

ined

by

the

Soc

ial S

ecur

ity D

epar

tmen

t;th

e re

mai

nder

unp

aid)

if r

equi

red

•Th

ree

mon

ths’

unp

aid

pare

ntal

leav

e

•N

o no

tice

requ

ired

in c

ases

of t

erm

inat

ion

for

disc

iplin

ary

reas

ons

•A

max

imum

of 1

2 w

eeks

’not

ice

depe

ndin

g on

the

leng

th o

f ser

vice

for

redu

ndan

cy

* P

rovi

ded

by t

he S

tate

and

by

the

empl

oyer

by

law

and

/or

colle

ctiv

e ag

reem

ent

** E

xclu

sive

of p

ublic

or

relig

ious

hol

iday

sN

ote:

the

con

tent

s of

thi

s ta

ble

prov

ide

a br

oad

over

view

onl

y, fo

r gr

eate

r de

tail

plea

se s

ee t

he r

elev

ant

sect

ion

of t

he G

uide

.



216

Min

imum

Wag

e

Max

imum

Wee

kly

Ho

urs

Ho

liday

Ent

itle

men

t**

Mat

erni

ty a

nd F

amily

Leav

e E

ntit

lem

ent

Min

imum

No

tice

by

Em

plo

yer

and

Ter

min

atio

nP

aym

ents

The

Net

herl

and

s

•S

tatu

tory

min

imum

wag

e

•c

1,30

0.80

per

mon

th fo

r em

ploy

ees

over

22,

excl

udin

g 8%

hol

iday

allo

wan

ce

•45

hou

rs

•A

vera

ge 3

6-40

hou

rs b

y co

llect

ive

or in

divi

dual

agre

emen

t

•20

day

s, u

sual

ly in

crea

sed

by in

divi

dual

or

colle

ctiv

e ag

reem

ent

plus

hol

iday

allo

wan

ce o

fei

ght

per

cent

of s

alar

y

•16

wee

ks’ m

ater

nity

leav

e

•P

ay: 1

00%

of s

alar

y up

to

ceilin

g

•S

ix m

onth

s’ u

npai

d pa

rt-t

ime

pare

ntal

leav

e pe

rch

ild

•Tw

o da

ys’ p

aid

pate

rnity

leav

e

•Fo

ur w

eeks

’ fos

ter

care

or

adop

tion

leav

e

•O

ne t

o fo

ur m

onth

s’ n

otic

e de

pend

ing

on le

ngth

of s

ervi

ce

•G

ener

ally

one

to

two

mon

ths’

sal

ary

per

year

of

serv

ice

depe

ndin

g on

age

and

leng

th o

f ser

vice

and

reas

ons

for

term

inat

ion

Po

land

•In

200

7 th

e m

inim

um s

tatu

tory

wag

e am

ount

s to

936

PLN

(app

c23

4) p

er m

onth

•40

hou

rs (e

ight

hou

rs p

er d

ay in

a fi

ve d

ay w

ork

wee

k)

•C

an b

e ex

tend

ed u

p to

48

hour

s.

•20

wor

king

day

s w

hen

the

empl

oyee

has

bee

nw

orki

ng u

p to

10

year

s;

•26

wor

king

day

s w

hen

the

empl

oyee

has

bee

nw

orki

ng m

ore

than

10

year

s.

•18

wee

ks’ m

ater

nity

leav

e fo

r fir

st c

hild

;

•20

wee

ks’ m

ater

nity

leav

e fo

r su

bseq

uent

child

ren;

•28

wee

ks’ m

ater

nity

leav

e fo

r m

ultip

le b

irths

;

•M

ater

nity

pay

of 1

00%

of r

emun

erat

ion;

•Th

ree

year

s’ u

npai

d pa

rent

al le

ave

for

each

pare

nt u

p to

chi

ld’s

four

th b

irthd

ay.

Em

ploy

men

t co

ntra

ct o

f ind

efin

ite d

urat

ion:

•Tw

o w

eeks

’ if t

he e

mpl

oyee

was

em

ploy

ed u

p to

six

mon

ths;

•O

ne m

onth

if t

he e

mpl

oyee

was

em

ploy

ed fo

r at

leas

t 6

mon

ths;

•Th

ree

mon

ths

if th

e em

ploy

ee w

as e

mpl

oyed

for

at le

ast

thre

e ye

ars.

•Th

e em

ploy

ee r

ecei

ves

rem

uner

atio

n du

ring

the

who

le n

otic

e pe

riod.

Com

pens

atio

n of

up

toth

ree

mon

ths’

sal

ary

may

be

paya

ble

if gr

ound

sfo

r di

smis

sal a

re n

ot ju

stifi

ed

Po

rtug

al

•S

tatu

tory

min

imum

wag

e

•In

200

7, c

403

per

mon

th

•40

hou

rs

•G

ener

ally

red

uced

by

colle

ctiv

e ag

reem

ent

•22

day

s (fi

ve d

ay w

eek)

•P

ossi

ble

incr

ease

up

to 2

5 da

ys s

ubje

ct t

o th

eem

ploy

ee’s

att

enda

nce

reco

rd

•12

0 da

ys’ m

ater

nity

leav

e pl

us 2

5% (3

0 da

ys) a

tem

ploy

ee’s

opt

ion

•P

ay*:

100

% o

f ave

rage

sal

ary

paya

ble

by S

ocia

lS

ecur

ity fo

r 12

0 da

ys o

r 80

% fo

r 15

0 da

ys

•Fi

ve d

ays’

pai

d pa

tern

ity le

ave

•Th

ree

mon

ths’

unp

aid

pare

ntal

leav

e

•In

cas

e of

red

unda

ncy:

60

days

’ not

ice

•O

ne m

onth

’s s

alar

y pe

r ye

ar o

f ser

vice

with

min

imum

of t

hree

mon

ths’

in c

ase

ofre

dund

ancy

or

illega

l dis

mis

sal

•Tw

o da

ys’ s

alar

y pe

r m

onth

of s

ervi

ce u

p to

6m

onth

s’ s

ervi

ce (t

erm

em

ploy

men

t co

ntra

cts)

•Th

ree

days

’ sal

ary

for

each

mon

th o

f ser

vice

inex

cess

of 6

mon

ths’

ser

vice

(ter

m e

mpl

oym

ent

cont

ract

s)

•15

-45

days

’ sal

ary

in c

ases

of i

llega

l dis

mis

sal

depe

ndin

g on

sen

iorit

y an

d le

ngth

of s

ervi

ce

* P

rovi

ded

by t

he S

tate

and

by

the

empl

oyer

by

law

and

/or

colle

ctiv

e ag

reem

ent

** E

xclu

sive

of p

ublic

or

relig

ious

hol

iday

sN

ote:

the

con

tent

s of

thi

s ta

ble

prov

ide

a br

oad

over

view

onl

y, fo

r gr

eate

r de

tail

plea

se s

ee t

he r

elev

ant

sect

ion

of t

he G

uide

.



217

Min

imum

Wag

e

Max

imum

Wee

kly

Ho

urs

Ho

liday

Ent

itle

men

t**

Mat

erni

ty a

nd F

amily

Leav

e E

ntit

lem

ent

Min

imum

No

tice

by

Em

plo

yer

and

Ter

min

atio

nP

aym

ents

Ro

man

ia

•S

tatu

tory

min

imum

wag

e: R

ON

390

per

mon

th(a

ppro

x E

uro

110)

, RO

N 2

.294

per

hou

rs (2

007)

•48

hou

rs

•21

wor

king

day

s

•O

ften

exte

nded

by

colle

ctiv

e ag

reem

ent

•12

6 da

ys’ m

ater

nity

leav

e

•85

% o

f sal

ary

paya

ble

by s

ocia

l sec

urity

•15

% o

f sal

ary

paya

ble

by e

mpl

oyer

for

six

wee

ks–

ofte

n ex

tend

ed t

o du

ratio

n of

mat

erni

ty le

ave

by c

olle

ctiv

e ag

reem

ent

•U

npai

d ch

ildca

re le

ave

up t

o ch

ild’s

2nd

birt

hday

•5-

10 d

ays’

pai

d fa

mily

eve

nt le

ave

•20

day

s’ n

otic

e

Slo

vaki

a

•S

tatu

tory

min

imum

wag

e: S

KK

7,6

00 p

er m

onth

(app

rox

225

Eur

o), S

KK

43.

70 p

er h

our

(app

rox

1.30

Eur

o)

•40

hou

rs

•38

.75

in t

wo

shift

ope

ratio

ns

•37

.5 in

thr

ee s

hift

oper

atio

ns

•G

ener

ally

red

uced

by

colle

ctiv

e ag

reem

ent

•Fo

ur w

eeks

(20

wor

king

day

s)

•Fi

ve w

eeks

if e

mpl

oyee

wor

ked

for

15+

yea

rs

•28

wee

ks’n

orm

al m

ater

nity

/pat

erni

ty le

ave

(but

only

one

par

ent

elig

ible

)

•37

wee

ks’ m

ater

nity

leav

eif

sing

le p

aren

t or

mul

tiple

birt

hs

•P

aym

ents

pro

vide

d by

sta

te s

ocia

l ins

uran

ceco

mpa

ny fr

om il

l-hea

lth in

sura

nce

fund

s

•U

npai

d pa

rent

al le

ave

until

the

chi

ld is

thr

eeye

ars

old,

par

enta

l lea

ve is

fund

ed b

y th

e st

ate

•Tw

o m

onth

s’ n

otic

e fro

m e

mpl

oyer

if le

ss t

han

five

year

s se

rvic

e

•Th

ree

mon

ths’

not

ice

from

em

ploy

er if

mor

e th

anfiv

e ye

ars

•E

mpl

oyee

nee

ds t

o gi

ve t

wo

mon

ths’

not

ice

•C

ompe

nsat

ion

equa

l to

sala

ry o

ther

wis

e pa

yabl

efo

r th

e du

ratio

n of

cou

rt p

roce

edin

gs w

here

dism

issa

l in

brea

ch o

f Lab

our

Cod

e

•S

ever

ance

pay

for

redu

ndan

cy u

sual

ly p

rovi

ded

for

in c

olle

ctiv

e ag

reem

ent

Slo

veni

a

•M

inim

um w

age

of c

522

per

mon

th

•Fo

ur h

ours

plu

s a

max

imum

8 h

ours

ove

rtim

e

•Fo

ur w

eeks

•A

fter

mat

erni

ty le

ave

a fu

rthe

r 26

0 da

ys’p

aren

tal

leav

e to

be

take

n by

eith

er p

aren

t

•A

ll m

ater

nity

, pat

erni

ty a

nd p

aren

tal l

eave

pay

born

e by

soc

ial s

ecur

ity

•10

5 da

ys’ m

ater

nity

leav

e to

beg

in 2

8 da

ysbe

fore

the

exp

ecte

d da

te o

f chi

ldbi

rth

at t

hela

test

•P

ater

nity

leav

e: 1

5 da

ys t

o be

tak

en w

ithin

6m

onth

s of

chi

ldbi

rth

and

75 d

ays

to b

eta

ken

befo

re t

he c

hild

’s 3

rd b

irthd

ay

•30

-150

day

s’ n

otic

e de

pend

ing

on g

roun

d fo

rte

rmin

atio

n an

d le

ngth

of s

ervi

ce

•S

ever

ance

pay

of b

etw

een

one

fifth

of a

mon

ths’

sala

ry t

o 10

mon

ths’

sal

ary

acco

rdin

g to

leng

thof

ser

vice

* P

rovi

ded

by t

he S

tate

and

by

the

empl

oyer

by

law

and

/or

colle

ctiv

e ag

reem

ent

** E

xclu

sive

of p

ublic

or

relig

ious

hol

iday

sN

ote:

the

con

tent

s of

thi

s ta

ble

prov

ide

a br

oad

over

view

onl

y, fo

r gr

eate

r de

tail

plea

se s

ee t

he r

elev

ant

sect

ion

of t

he G

uide

.



218

Min

imum

Wag

e

Max

imum

Wee

kly

Ho

urs

Ho

liday

Ent

itle

men

t**

Mat

erni

ty a

nd F

amily

Leav

e E

ntit

lem

ent

Min

imum

No

tice

by

Em

plo

yer

and

Ter

min

atio

nP

aym

ents

Sp

ain

•c

513.

00 p

er m

onth

•40

hou

rs a

vera

ged

on a

nnua

l bas

is

•O

ften

redu

ced

by C

BA

s

•30

cal

enda

r da

ys

•16

wee

ks’ m

ater

nity

leav

e (1

8 w

eeks

’ lea

ve if

mor

e th

an o

ne c

hild

is b

orn)

•P

ay: 1

00%

of r

efer

ence

con

trib

utio

n ba

sepr

ovid

ed b

y th

e S

ocia

l Sec

urity

Sys

tem

dur

ing

mat

erni

ty le

ave

•30

day

s’ n

otic

e fo

r ob

ject

ive

dism

issa

l

•45

day

s’ s

alar

y fo

r ea

ch y

ear

of s

ervi

ce u

p to

42m

onth

s’ s

alar

y (u

nfai

r di

smis

sal).

•20

day

s’ s

alar

y fo

r ea

ch y

ear

of s

ervi

ce u

p to

12m

onth

s’ s

alar

y (fa

ir ob

ject

ive

dism

issa

l).

•E

ight

day

s’ s

alar

y pe

r ye

ar o

f ser

vice

or

assp

ecifi

ed b

y ap

plic

able

legi

slat

ion

(for

tem

pora

ryco

ntra

cts,

exc

ept

subs

titut

ion

and

inte

rnsh

ipco

ntra

cts)

Sw

eden

•N

o st

atut

ory

min

imum

wag

e: w

age

rate

s of

ten

regu

late

d by

col

lect

ive

agre

emen

t

•40

hou

rs –

may

be

redu

ced

by c

olle

ctiv

eag

reem

ent

•A

vera

ge w

eekl

y w

orki

ng h

ours

in t

otal

(inc

ludi

ngov

ertim

e) m

ay n

ot e

xcee

d 48

hou

rs d

urin

g an

yfo

ur m

onth

per

iod

•M

inim

um 2

5 da

ys

•60

day

s’ m

ater

nity

leav

e be

fore

birt

h

•48

0 da

ys’ p

aid

pare

ntal

leav

e (p

re-b

irth

mat

erni

ty le

ave

incl

uded

). Th

e be

nefit

whi

ch is

paid

by

the

Soc

ial I

nsur

ance

Offi

ce m

ay b

edr

awn

at a

ny t

ime

until

the

chi

ld r

each

es t

he a

geof

eig

ht o

r co

mpl

etes

the

firs

t cl

ass

of s

choo

l.

•P

ay is

80%

of o

rdin

ary

sala

ry a

s pe

r ru

les

ofN

atio

nal S

ocia

l Sec

urity

Sys

tem

for

390

days

(up

to a

cer

tain

cap

), pl

us S

EK

180

per

day

for

90da

ys

•D

iffer

ent

rule

s ap

ply

if th

e ch

ild w

as b

orn

befo

re1

Janu

ary

2002

or

befo

re 1

Jul

y 20

06re

spec

tivel

y

•O

ne t

o si

x m

onth

s’ n

otic

e de

pend

ing

on t

heem

ploy

ee’s

leng

th o

f ser

vice

and

/or

age.

Lon

ger

notic

e pe

riod

may

be

stip

ulat

ed in

col

lect

ive

agre

emen

ts

•Fu

ll pa

y an

d ot

her

bene

fits

thro

ugho

ut n

otic

epe

riod

UK

•S

tatu

tory

min

imum

wag

e: £

5.35

per

hou

r(£

5.52

from

Oct

ober

200

7) fo

r ad

ults

, £4.

45(£

4.60

from

Oct

ober

200

7) fo

r yo

ung

peop

leag

ed 1

8 to

21,

and

£3.

30 fo

r 16

and

17ye

arol

ds (£

3.40

from

Oct

ober

200

7)

•48

hou

rs p

er w

eek

aver

aged

ove

r 17

wee

ks

•Fo

ur w

eeks

’ pai

d le

ave

•R

isin

g to

4.8

wee

ks (2

4 da

ys) f

rom

Oct

ober

2007

•R

isin

g to

5.6

wee

ks (2

8 da

ys) f

rom

Oct

ober

2008

•1

year

’s m

ater

nity

leav

e

•S

tatu

tory

Mat

erni

ty P

ay fo

r 39

wee

ks

•13

wee

ks’ u

npai

d pa

rent

al le

ave

•Tw

o w

eeks

’ pai

d pa

tern

ity le

ave

at b

asic

SM

Pra

te

•A

dopt

ion

leav

e of

bet

wee

n 26

wee

ks a

nd o

neye

ar

•O

ne t

o 12

wee

ks’ n

otic

e de

pend

ing

on le

ngth

of

serv

ice

•S

tatu

tory

red

unda

ncy

paym

ent

(if r

edun

danc

y)up

to

a m

axim

um o

f £9,

300

depe

ndin

g on

leng

th o

f ser

vice

•C

ompe

nsat

ion

for

unfa

ir di

smis

sal c

ombi

ned

max

imum

of £

69,9

00 p

lus

annu

al in

dexa

tion

(from

1 F

ebru

ary

2007

)

* P

rovi

ded

by t

he S

tate

and

by

the

empl

oyer

by

law

and

/or

colle

ctiv

e ag

reem

ent

** E

xclu

sive

of p

ublic

or

relig

ious

hol

iday

sN

ote:

the

con

tent

s of

thi

s ta

ble

prov

ide

a br

oad

over

view

onl

y, fo

r gr

eate

r de

tail

plea

se s

ee t

he r

elev

ant

sect

ion

of t

he G

uide

.

Employment and Benefits in the European UnionAcknowledgements

AcknowledgementsThis publication has been prepared withthe assistance of lawyers in each of the27 Member States of the EuropeanUnion.

This publication and its companionbooklet Employee Share Plans in Europeread together, provide an introduction toemployee benefits and employment lawin each Member State. Copies ofEmployee Share Plans in Europe areavailable from Clifford Chance’sPublications Unit in London.

This publication has been prepared bythe Employment Unit of Clifford Chancein London with assistance from lawyers inother European offices of Clifford Chanceand contacts in other law firms in Europe.The principal Clifford Chance contributorswere Tania Stevenson (editor); Ruth vanAndel (Amsterdam), Xavier Remy andGert Cuppens (Brussels), LászlóKenyeres (Budapest), Nicole EngesserMeans (Frankfurt), Tania Stevenson(London), Albert Moro and IsabelleComhaire (Luxembourg), MercedesOlabarri and Efraina Fernandez (Madrid),Simonetta Candela and Marina Mobiglia(Milan), Viviane Stulz (Paris), Mirjana Gray(Prague) and Anna Jastrun (Warsaw). Theprincipal contributors from other law firmsin Europe, whose help and assistance wegratefully acknowledge, were:

■ Gerold Zeiler – SchönherrRechtsanwälte Gmbh Attorneys atLaw, Tuchlauben 17, A-1010 Vienna,POB 41, Austria.Tel: +43 1 534 37 133.Fax: +43 1 534 37 6133.E-mail: [email protected]: www.schoenherr.at

■ Sergey Penev/Yonko Hristov – Penev& Partners, 19A Patriarch EvtimiiBlvd, 1142 Sofia, Bulgaria.Tel: +359 2/930 0970, 980 0838.Fax: +359 2 930 0978.E-mail: [email protected]: http://www.penev.eu

■ Xenios L. Xenopoulos & Co,Aluminium Tower, 5th Floor, 2Limassol Avenue 2003 Nicosia,Cyprus, PO Box 210036, 1500Nicosia Cyprus.Tel: +357 22 33 69 33.Fax: + 357 22 33 69 33.E-mail: [email protected]: www.xenopoulos.com.cy

■ Claus Juel Hansen/Anja BÜlowJensen – Kromann Reumert,Sundkrogsgade 5, DK-2100Copenhagen, Denmark.Tel: +45 70 12 12 11.Fax: +45 70 12 13 11.E-mail: [email protected]: www.kromannreumert.com

■ Toomas Prangli – Sorainen LawOffices, Pärnu mnt.15, 10141,Tallinn, Estonia.Tel: +372 640 0900.Fax: +372 640 0901.E-mail: [email protected]: www.sorainen.com

■ Sarah Tähkälä/Johanna Haltia-Tapio– Hannes Snellman Attorneys at LawLtd, FIN 00131, PO Box 333,Helsinki, Finland.Tel: +358 9 2288 4298.Fax: +358 9 2288 4210.E-mail: [email protected]

■ Betty Smyrniou – Bahas, Gramatidis& Partners, 26 Filellinon Street,Athens 105 58, Greece.Tel: +30 210 33 18 170.Fax: +30 210 33 18 171.E-mail: [email protected]

■ Terence McCrann/Serena Connolly–McCann FitzGerald, Riverside One,Sir John Rogerson’s Quay, Dublin 2,Ireland.Tel: +353 1 829 0000.Fax: +353 1 829 0010.E-mail: [email protected]@mccannfitzgerald.ieWeb: www.mccannfitzgerald.ie

■ Agris Repss and Andis Burkevics –Sorainen Law Offices, Kr.Valdemaraiela 21, Riga LV 1010, Latvia.Tel: +371 (-7) 365 000.Fax: +371 (-7) 365 001.E-mail: [email protected]@sorainen.IvWeb: www.sorainen.Iv

■ Renata Berzanskiene/ViktorijaKapustinskaja – Sorainen LawOffices, Jogailos G.4, LT0 1116Vilnius, Lithuania.Tel: +370 526 85040.Fax: +370 526 85041.E-mail: [email protected]: www.sorainen.com

■ Matthew Brincat – Ganado &Associates, Advocates;57 St Christopher Street, Valletta,Malta VLT08. Tel: +356 21 247902;Fax: +356 21 240550.E-mail: [email protected]: www.jmganado.com.

■ Sandra Lima Da Silveira – GonçalvesPereira Castelo Branco eAssociados, Praça Marquês dePombal 1-8?, 1250-160 Lisbon,Portugal. Tel: +351 21 355 3800.Fax: +351 21 354 97 84.E-mail: [email protected]

■ Daniel Badea and Andreea Sisman –Badea Asociatii in association withClifford Chance, 18 CaleaDorobantilor, Sector 1, Bucharest,Romania.Tel: +40 (21) 211 4165.Fax: +40 (21) 211 416.E-mail: [email protected]

■ Radoslava Janosovska- Cernejova &Hrbek, Kycerského 7, 811 05Bratislava, Slovak Republic.Tel: +421 2 5244 4019.Fax: +421 2 5244 2650.E-mail: [email protected]: www.chplaw.sk


219


■ Dr. Ralf Peschek and MelanieTaufner – Wolf Theiss, RechtanwälteAttorneys-at-law, Schubertring 6,A-1010 Wien, Slovenia.Tel: +43 1 51510 5230.Fax: +43 1 51510 2523.E-mail: [email protected]@wolfthesis.comWeb: www.wolfthesis.com

■ Henric Diefke and Maria Gill –Mannheimer Swartling, Lilla Torget 1,Box 2235, S-403 14 Göteborg,Sweden.Tel: +46 31 355 1600.Fax: +46 31 355 1601.E-mail: [email protected]@msa.seWeb: www.mannheimerswartling.se

220

© Clifford Chance LLP, May 2007.

Clifford Chance LLP is a limited liability partnership registered inEngland and Wales under number OC323571.Registered office: 10 Upper Bank Street, London, E14 5JJWe use the word 'partner' to refer to a member of Clifford Chance LLP,or an employee or consultant with equivalent standing andqualifications.

This publication does not necessarily deal with every important topic nor cover everyaspect of the topics with which it deals. It is not designed to provide legal or otheradvice.

If you do not wish to receive further information from Clifford Chance about events orlegal developments which we believe may be of interest to you, please either sendan email to [email protected] or contact our databaseadministrator by post at Clifford Chance LLP, 10 Upper Bank Street, Canary Wharf,London E14 5JJ.

Amsterdam � Bangkok � Barcelona � Beijing � Brussels � Bucharest* � Budapest � Dubai � Düsseldorf � Frankfurt � Hong Kong � London � Luxembourg � Madrid � Milan � Moscow� Munich � New York � Padua � Paris � Prague � Rome � São Paulo � Shanghai � Singapore � Tokyo � Warsaw � Washington, D.C.*Associated office

www.cliffordchance.com

Amsterdam Bangkok Barcelona Beijing Brussels Bucharest* Budapest Dubai Düsseldorf Frankfurt Hong Kong London Luxembourg Madrid Milan Moscow

Munich New York Padua Paris Prague Rome São Paulo Shanghai Singapore Tokyo Warsaw Washington, D.C.

*Associated office

www.cliffordchance.com

© Clifford Chance LLP, May 2007.

Clifford Chance LLP is a limited liability partnership registered in England and Wales under number OC323571.

Registered office: 10 Upper Bank Street, London, E14 5JJ

Briefing.employment Benefits in the European Union.2007!05!01.Clifford Chanse LLP.eng.Andisb Agrisr

Documents

Transcript of Briefing.employment Benefits in the European Union.2007!05!01.Clifford Chanse LLP.eng.Andisb Agrisr