Further to our previous client alert on significant changes proposed to the Labour Protection Act, at the time when the Cabinet approved in principle the amendments to the Draft Labour Protection Act (the "Draft") back in September last year, the Cabinet finally approved the Draft on 28 August 2018, and sent the Draft to the National Legislative Assembly (the "NLA") to consider, review and propose changes to the Draft where appropriate.
From our review, the current Draft entails significant changes to the previous draft. We have summarized the main important changes as follows:
- The maximum rate of severance will no longer be capped at 300 days of the employee’s latest wage rate for employees with ten or more years of service. A new maximum severance rate will now be capped at 400 days of the employee's latest wage and apply to employees with 20 or more years of service.
- Business leave of at least three days per year with pay has now been set as the minimum number of business leave days for all employees. Currently, the Labour Protection Act (the "LPA") only requires that an employer arranges for a certain number of days of business leave for the employee with or without pay as the employer deems appropriate.
- Maternity leave has been clarified to include leave taken to visit doctors for pre-natal care.
- Wage and "other money which an employer is required to pay under the LPA" must be paid within three days from the termination effective date. While no further clarification is provided, it is possible that this "other money which an employer is required to pay under the LPA" could also include severance pay - meaning that severance pay must be paid within three days from the effective date of termination. If this is in fact the case, it could be seen as a move away from the current precedent that severance pay must be paid on the effective date of termination.
- An interest rate in the case of employer defaulting on the below payments will be 15 per cent, an increase from the current 7.5 per cent:
- Payment in lieu of advance notice; and
- Payment in the case that the employer has to temporarily cease its business operation
Change of employer, or merger and/or acquisition between the employer and another party that results in any employee becoming an employee of a new employer will require the employee's consent and the new employer must assume all existing rights and obligations of the previous employer. This could include all cases of transfer of employment, merger and acquisition, and amalgamation
- Payment in lieu of advance notice must be paid upon the effective date of termination
- If an employer is relocating its premises, whether the new premise is an existing or a new one, the employer must announce the name of employees, new business premise and the relocation date to the employees at a public area of the current business premise where all employees are able to notice the announcement clearly, not less than 30 days before the relocation date. If an announcement is not made, special severance pay in lieu of advance notice must be paid to employees who refuse to be relocated.
The obligation to announce the relocation of the business premises and the affected employees in a public area of the current business premise has only been introduced in this current Draft.
- Employees whose normal living or whose family's normal living will be substantially affected by the employer's relocation of its business premises, whether the new premise is an existing or a new one, are entitled to refuse to move to another premise by sending a written notice to the employer within 30 days of the announcement date. The employment agreement shall be considered to have ceased on the relocation date and the employee shall be entitled to special severance pay.
- Special severance pay or special severance pay in lieu of advance notice must be paid within seven days from the cessation date of the employment agreement.
On 19 September 2018, the NLA initially considered the Draft approved by the Cabinet. The NLA are to deliberate and propose changes (if any). If and once the Draft is approved by the NLA, it will be presented for the King's endorsement and will then be enacted and published in the Royal Gazette. This Draft is categorized as requiring urgent attention from the NLA. Thus, it is possible the Draft could be finalized and enacted by early next year.
The team at Baker McKenzie will keep you informed of any further updates.