Employment Outlook: Top European employment issues for 2023

Crowley:

 Hello, everyone. And welcome to our podcast on the top European employment issues for 2023. I'm Crowley Woodford. I head up the Asher's European Employment Practise. And today we'll be doing a whistle-top tour around our European practises to discuss what employers should be looking out for in 2023. Joining me today are my Asher's colleagues Ruth Buchanan, an employment partner in London; Andreas Mauroschat, a partner in Frankfurt; Muriel Pariente, our partner in our Paris office; and Cristina Grande, employment counsel in Madrid.

So, let's start in the UK. Ruth, can you tell us the key UK employment issues for employers in the year ahead, please?

Ruth:

 Hi, Crowley. From a UK perspective, it's really a bit of a crystal ball gazing exercise at the moment.

We've got a piece of legislation called the Retained EU Law Revocation and Reform Bill, very snappy titled, currently making its way through Parliament. And in its current form, the EU-derived subordinate legislation and retained direct EU legislation are going to be revoked by the 31st of December next year, unless that legislation otherwise gets preserved. However, in recent weeks actually Rishi Sunak, our prime minister, has flagged that he may reconsider that 2023 date and deprioritize the bill. Also, opposition parties and the conservative backbenchers in the UK

Parliament are trying to delay the bill. And particularly, they want to delay it back to 2026. And the Labour Party are also planning amendments to retain key worker rights around, for example, holiday and maternity.

And then on top of that, to add further uncertainty, the regulatory policy committee recently published their opinion on the impact assessment for the bill. And it concluded that the impact assessment wasn't fit for purpose and didn't sufficiently consider the full impact of the bill.

And so, against that backdrop, and from a UK employment law perspective, I think it's really unlikely that the government will remove any key pieces of legislation. What I think is more probable is that the UK employment legislation, which replicates the EU-derived legislation, will be introduced perhaps with slight amendments to the terms or possible reductions to the employee entitlement.

Crowley:

 Thanks, Ruth. And what legislation do you think is going to be in the firing line?

Ruth:

I think there's a few that are potentially in the frame and that's those that impose disproportionate burdens on employers and are unpopular with employers. And so, those include regulations relating to part-timers as agency workers and to fixed term staff, and their rights to equal treatment as compared with full-time workers.

Crowley:

And 2P, what do you think is going to happen there?

Ruth:

My gut feel on 2P is that there won't be any material changes. When the government consulted on changing that legislation back in 2014, the message they got back from both employer organisations and also the trade union side was that they both really liked the certainty that 2P provides. However, one area that is really ripe for change is giving the ability to employers to harmonise terms and conditions following a 2P transfer, as the restrictions in that area really give rise to a lot of frustrations for employers.

Crowley:

And does this bill deal with EU and UK case law?

Ruth:

Yeah, so the bill is also proposing to remove a number of EU-derived principles. And that includes the supremacy of EU law, the principle of direct effect, and general principles of EU law. So, removing the principle of supremacy of EU law would mean that employment tribunals and courts here would no longer use EU decisions to help them interpret UK law and general principles of EU law would no longer apply. And so, any conflict between the retained EU law and domestic law would be resolved in favour of domestic law. And a number of key principles of employment law are enshrined in cases which relied upon EU decisions or are themselves derived from EU decisions. And so, the interpretation of those principles could be subject to change if EU decisions are no longer a valid means of interpretation.

Crowley:

Thanks. And what else might there be in the pipeline for the UK in 2023?

Ruth:

Yeah, so there are a number of bills going through Parliament relating to new natal leave, carriage leave, and redundancy protection for pregnant women and new mothers, which I think will all become law next year.

However, one area I wanted to focus on today is flexible working requests. Following the pandemic, and as we all know, there's been a culture shift in many organisations where flexible working is now the norm. And there was a government consultation in 2021, which looked at proposed changes to the statutory flexible working regime. And the government has recently issued a response to that consultation. And I haven't got time today to look at all of the points in the government's response, but if you do want a bit more information, we have prepared a client briefing, "How Flexible is Flexible Working?," which is available on the Asher's website.

The key takeaways are that changes are in the pipeline such as the right to request flexible working on day one. And there will also be new administrative processes which underpin the right to request flexible working, which will include employees being able to make two requests in any 12-month period, up from one currently. And the employer's deadline for responding will be shortened from the current three months to two months.

So, although legislation is needed to make these changes, the flexible working space is one for employers to watch in 2023 as changes to your flexible working processes and policies might be necessary.

Crowley:

Thanks, Ruth. Turning to Germany, Andreas, what's on the horizon for you there in Germany?

Andreas:

Yeah, thanks, Crowley. Well, we do indeed have a few interesting topics in Germany which will certainly have an impact on our clients next year.

Let's start with time recording. On the back of the 2019 European Court of Justice ruling on time recording, we've had a couple of court decisions in Germany confirming that employers in Germany must indeed keep records of their employees' working time, including end and start time and breaks taken. Now, on top of that, just in September our federal labour court held that employers must also introduce a time recording system to comply with the obligations the European Court has established. Unfortunately, that hits us here at a time when the new German working time act has not even entered into force. And it remains completely open at this stage what specific functionalities a time recording system would need to have under the new law.

So, the decision is particularly interesting and relevant for clients who currently do not run any dedicated time recording system. We've looked at a couple of quite innovative, mostly ad-based systems which would allow clients to comply in a practical way. However, whether any of these standalone tools can be rolled out at a client depends very much on their existing system environment. So, it may be difficult to get in place proper systems.

In any case, I think this is one of the prime issues which clients will need to tackle in 2023.

Crowley:

Thanks, Andreas. And I understand that the whistle-blowing implementation is causing a few headaches there in Germany.

Andreas:

Yeah, you'll certainly right, Crowley. The Whistleblower Protection Act, which is the German implementation of the EU directive, should have been implemented by December 17, 2021. However, at this stage the act is still making its way through the parliamentary process and the commission has started infringement proceedings against Germany because of that.

Well, takeaway of course is, clients who still do not have an established whistle-blowing system and a procedure behind that system need to roll out that as a top priority in 2023. As a reminder, under the directive companies with between 50 and 250 employees must establish their whistle-blowing structure before December 17, 2023, so the end of next year. But companies with more than 250 employees are on a much stricter timeline and must implement their whistle-blowing structures as soon as possible in 2023, ideally before the German Whistleblower Protection Act comes into force, which should hopefully now be in the beginning of 2023.

One final thing on the horizon in Germany I wanted to mention is the German Supply Chain Act, which will come into force on January 1, 2023. The Supply Chain Act will bring extensive due diligence and reporting obligations for companies based in Germany, regarding basically the human rights situation of all of their suppliers along the supply chain. So, companies which identify, as a result of that due diligence, any human rights risks in their supply chains must adopt preventive and remediating measures to deal with that, which may include getting rid of suppliers who are unable to provide proper guarantees and safeguards. There is some pressure behind that, as non-compliance may result in massive fines up to 8 million or, for companies with turnover of more than 400 million, up to 2% of their annual worldwide turnover.

So, think those were the highlights. Thanks and back to you, Crowley.

Crowley:

Thanks very much, Andreas. Muriel, turning to France, what can French employers expect in 2023?

Muriel:

Yes, thank you, Crowley. We have a few things coming up for next year.

First of all, the French parliament has just passed a new law in favour of full employment. One of the main features of the test is most certainly the one of that provides for presumption of resignation for no call, no show employees. No call, no show employees is a situation in France where the employee just stopped showing up for work without the employer's permission and without any justification. In such a situation, the employer usually proceeds with the termination of the concerned employee for gross misconduct, so the employer won't pay any severance like the legal indemnity or the notice period.

But under French law, employees are entitled to unemployment insurance only in case of involuntary loss of unemployment. This was the case with the termination for gross misconduct of no call, no show employees, as opposed to an employee who has duly resigned and is not entitled to any unemployment insurance and compensations since they willingly and [inaudible] terminated their own employment contract.

Now, with this new law, an employee who abandons his position will be presumed to have resigned after the employer has served a formal notice requiring the employee to resume working immediately. They will therefore not be entitled to unemployment insurance. However, the new law provides for the possibility for the employee to challenge and reverse this presumption through an accelerated legal procedure before the labour court.

The aim of this reform is to limit the use of this failure by employees who wanted to resign and stopped coming to work in order to be entitled to unemployment insurance compensation, which is very important in France. It's like 53% of the gross remuneration. However, this provision will not apply to employees who leave for health and safety reasons. This reform, which should come into force in January 2023, leaves many practical questions for our work clients to work through next year.

Crowley:

Thanks very much, Muriel. That's very interesting. I'm sure we'll keep you busy. Also, I understand a bit pension reforms also imminent in France.

Muriel:

Yeah, that will be a big issue.

Maybe as you know, the French government has recently announced that the pension reform, which has already been postponed many times and which has been the subject of much debate in

France over the past few years, will still take place in 2023 and come into force next summer. The French government has a budgetary and economic plan here by reducing the funding of civil servants' pension, employees of that state. It hopes there will be an increase in the number of employees who continue working past a certain age.

Most generally, the purpose of the reform is to gradually raise the legal retirement age to 65 from the current 62 for all employees. This is a really huge reform. The reform could involve a gradual increase of the legal retirement age to 65 years by the middle of the 2030's by raising it by four months per year. However, long carriers and the hardship of certain occupations should be taken into account. The rules for combining work and retirement should also be modified and the minimum pension of 1,100 will be guaranteed for full carrier.

Let's see that because I don't know if you know that, but in France increasing the pension and the current age is always very complicated. So, I guess this will be a lot of debate before the parliament in France.

Crowley:

Yes. And potential industrial action, I'm sure.

Muriel:

For sure.

Crowley:

Thanks very much, Muriel. Cristina, will 2023 be a busy year from an employment perspective in Spain?

Cristina:

Thanks. Crowley. Yes, there are a number of changes that employers should look at for in 2023 in relation to the Spanish operations.

Firstly, there is going to be an increase in social security costs. The Spanish social security system, in general terms, is funded by way of compulsory contributions for employers and employees.

And the amount paid is calculated by multiplying a social security contribution base that is similar to the monthly salary by rate of around 31-35% for employer side.

It's here the Spanish government establishes the maximum and minimum limits to be applied to the social security contribution basis. For example, in 2022, this year, the maximum social security base is 4,139 euros per month. And this limit applies irrespective of whether employees' salary is higher than the set maximum basis. However, the draught of the general state budget for 2023 proposed to increase the maximum contribution basis by 8.6% for next year. So, in practice, this decision will have direct impact on the employer's social security cost.

This proposal has generated a lot of controversy because it was unexpectedly announced without any prior notice by the government, even though the government, trade unions, and employer representatives are members of a social dialogue round table where all the employment-related issues should be negotiated. So, at this stage, the proposal is going to the Spanish parliament. But it seems that this will be approved because the government has already committed to increase public pensions by 8.5% and therefore there is a need for additional funds to cover these expenses.

Besides, the government would like to leave the cap on the social security basis to increase the social security revenues in an attempt to reduce the deficit that has been dragging on for years and to make this pension system more sustainable. So, the idea is to implement this new regime gradually, but it seems that for 2023, an increase of 8.6% is quite high.

Crowley:

Yeah, that certainly seems quite a hike given the difficult trading conditions that many employers are potentially facing at the moment. I also understand that equality and dignity is also on the employment agenda for you.

Cristina:

Yeah, this year has seen a lot going on in this area in Spain. For example, the recent law for equal treatment under nondiscrimination has attached new grounds on discrimination such as gender expression, disease, or health condition, HIV status, or genetic preposition for [inaudible].

This new law, in addition, establishes that regulations will be introduced, although nothing has been introduced yet. But these regulations will require companies with more than 250 employees to publish detailed wage information, so the differences in salary could be analysed to determine whether there are conditions or frequent stances that could lead to understand that there is discrimination.

This definitely will have an impact for our clients and human resources departments concerning hiring and salaries policies.

In addition, it will be difficult for some of our clients to comply with these registers because for our data protection or an intimacy perspective, these kind of issues cannot be asked to employees.

You cannot ask any personal issues to them. So, we'll have to wait and see when this new regulations are published and how they will apply in practise.

And in addition, as regards to quality and diversity, there has been a recent reform of the criminal law, by which employers, as legal entities, can be criminally liable in cases of harassment or sexual harassment for offences committed in their name or on their behalf or by legal representatives or authorised individuals who take decisions on their behalf and for their benefit or indirect benefit, or when this individuals breach their duties of supervision and control concerning harassment and sexual harassment. So, as per this new legal framework, these liabilities will not arise if employers adopt and effectively execute organisation and management policies to prevent those offences or to significantly reduce the risk of them taking place.

So in 2023, employers must be more proactive in this space by providing training with the internal rules, guidelines, and supervising implementation of these rules and policies.

Crowley:

Thanks, Cristina. I can certainly see how Spanish employers are going to have a very busy year next year. Was there anything else that you wanted to mention?

Cristina:

Yes, I just wanted to mention briefly the new interns, the [inaudible]. The Spanish government is working on legislation concerning interns. And this is because employment inspections in Spain at workplaces are discovering that a lot of jobs are being done by interns who are in fact ordinary employees. So, it seems that there is a draught of this new regulation. Following information, say served by trade unions, the key issues can be summarised as follows:

There will be a more restrictive definition of non-employment trainees or interns. There will be a maximum number of interns per company. They must be 20% of the company's total workforce.

That would be the cap. However, there would be the regard regardless of the size of the company, any company could take two trainees. And companies also must appoint tutors to take charge of coordination and monitoring the student programmes. And there must be a maximum of five trainees per tutor, or three in the case companies with less than 30 employees.

Crowley:

Thanks very much, Cristina.

That brings us to the end of our brief roundup of the top European employment issues for 2023. Of course, if you'd like to discuss any of the topics that we've covered today, please do get in contact with us. Thank you for listening. We hope you all enjoy this festive season and wish you all the very best for the new year.

Thank you.