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Employment Contracts in Europe L&E Global - ACC Europe webinar Dr. Kara Preedy, LL.M., Lic.dr. June 28, 2011

Copyright ©2011, L&E Global

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OVERVIEW I. 

Introduction 1.  European Union ( EU ) 2.  Sources of European Labor Law

II. 

Employment Contracts 1.  2.  3.  4.  5.  6.  7.  8. 

Formalities Essential Content Working time Remuneration Restrictive covenants Absence / garden leave etc Fixed term Termination

III.  Conclusion/ Expected future development

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I. 

Introduction 1. 

European Union („EU“) –  –  –  –  –  – 

Economic and political union of 27 member states More than 500 million citizens Development of a single market through standardized system of laws ensuring free movement of people, goods, services and capital Common policies on trade, agriculture, fisheries and regional development Common currency in 16 member states (€-Zone) Common institutions (Commission, Council, Parliament, Court of Justice, Central Bank)

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I. 

Introduction 2.  Sources of European Labor and Employment Law – 

„European Law“ •  • 

– 

National Law •  •  •  •  • 

– 

Directives Regulations

Statutes/Codes National, industry-wide and company-wide collective bargaining agreements (most Member States) Works council agreements (some Member states) Individual employment contracts Individual company practices

Case law

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I. 

Introduction Why should you not take a coffee break now ?!

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I. 

Introduction

–  To work successful with your employees in Europe, don‘t follow your intuition! –  Learn about: »  European labor law principles »  National diversity –  Doing business in Europe requires Local Expertise

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II. 

Employment Contracts Employment relationship is governed by •  Statutory law and other collective sources of law •  Employment contracts 1.  Formalities -  In most European jurisdictions, employer must notify employee of the essential terms of the employment -  Written Form (not everywhere compulsory but most common) -  Usually before the employment starts or -  In some countries: shortly after the employment has started -  Specific language requirements in different member states, e.g. Belgium, France

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II. 

Employment Contracts 2.  Essential content 1.  Crucial elements •  •  •  •  •  • 

Identity (name and address) of the parties Starting date of employment Remuneration Job description Hours of employment In fixed term employments: period of employment & some countries, reason for fixed term

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II. 

Employment Contracts 2.  Common clauses •  •  •  •  •  •  • 

Place of work /mobility clause Trial period Annual vacation Notice periods for termination General reference to any applicable collective bargaining agreement or other rules that may apply to employment relationship Confidentiality Post-employment non-compete

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II. 

Employment Contracts •  In many countries: clauses less favorable to employee than mandatory statutory law and/or collective bargaining agreements are invalid •  Modification of employment contract generally requires employee‘s consent

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II. 

Employment Contracts 3. 

Working Time •  EU working time directive 2003, ensuring in each Member State standardized minimum requirements to protect employees health and safety •  More detailed than FLSA, very limited exempt categories • 

Specific + complex national legislation, e.g. Ø  Weekly working time may not exceed an average of a certain amount of hours, e.g. –  Spain: max. 40 weekly hours of regular working time (+ 80 hours annual overtime) –  Germany: max. of 48 weekly hours (incl. overtime)

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II. 

Employment Contracts Ø  Mandatory rest break during working time –  e.g. Germany, Spain, Belgium: if employee is on duty > 6 hours Ø  Minimum rest period –  e.g. mandatory weekly rest of 24 uninterrupted hours for each seven-day period in Germany, Spain, Belgium, France –  e.g. mandatory daily rest period of 11 consecutive hours in 24 hours in Germany, France, Belgium, Italy Ø  Overtime regulations Ø  Regulations to restrict work on Sundays

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II. 

Employment Contracts 4.  Remuneration – 

– 

Possible elements •  Basic remuneration –  Minimum wage (not in all Member States) –  Often part of collective bargaining agreements •  Bonus –  Short term incentives –  Long term incentives •  Other benefits –  Company car –  Capital-forming payments –  Additional company pension scheme –  … Tax and social security payments and/or withholdings (e.g. health insurance, unemployment insurance, pension insurance)

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II. 

Employment Contracts 5.  Restrictive covenants •  • 

• 

• 

Trade secrets and confidential business information Post-employment non-compete –  More restrictive interpretation than in the US –  Must be reasonable in scope, geographical area and time period –  Enforceable only if: •  In writing •  In some Member States: compulsory compensation payment during restrictive period (e.g. Germany, France) Non solicitation of clients and/or employees –  Less restrictive than non-compete –  Subject to specific national conditions IP-Rights (e.g. employees inventions)

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II. 

Employment Contracts 6.  Absence/Garden Leave – 

– 

Vacation •  Minimum paid annual leave •  National differences: France 5 weeks per year / most other member states: minimum of 4 weeks p.a. •  In many countries it is common to grant more vacation, e.g. Germany 26-28 working days Statutory public holidays •  Are paid by employer

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II. 

Employment Contracts –  Maternity/Paternity leave •  Mandatory maternity leave; e.g. –  Germany: 6 weeks before, 8 weeks after giving birth –  Spain: no mandatory leave before giving birth, 16 weeks after giving birth –  Italy: generally 2 months before, 3 months after giving birth

•  Some countries: mandatory paternity leave, if requested by employee –  Belgium: 10 days; France: 11 days; Spain: 13 days

•  Some countries: parental leave –  –  –  – 

Belgium: 3 months (dividable), with family allowance paid by the state France: 1 year, renewable twice Italy: 6 months Germany: up to 3 years, with 12 months family allowance paid by the state

•  Personnel planning often difficult also due to far-reaching rights for part-time work upon return

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II. 

Employment Contracts –  Garden leave •  Generally not included in employment contracts •  But granted as part of termination/severance package •  Common alternative/supplement to severance payment •  Generally permissible, subject to different conditions in different Member States •  Full remuneration including all benefits •  Problematic: Bonus payments

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II. 

Employment Contracts 7.  Fixed Term • 

European and national restrictions

• 

Often: limited number of fixed term employments between same parties

• 

Often: only admissible for limited period of time

• 

Some countries: reason for fixed term is necessary and must be named

• 

Automatic end of employment at expiration date

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II. 

Employment Contracts 8.  Termination / dismissals • 

In case of dismissal, specific formalisms & procedures must be observed (specific rules depending on country)

• 

Distinction between: •  Ordinary dismissal and •  Dismissal for cause with immediate effect

• 

Ordinary dismissal, usually only permitted for objective reasons, e.g. •  Dismissal for person-related reasons (i.e. due to the employee’s inability to do the work) •  Conduct-related dismissal •  Operational/economical reasons •  Dismissal for low performance possible, but difficult

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II. 

Employment Contracts •  Special and strict regulations in case of collective redundancies •  Further protection of special employees (e.g. due to pregnancy, disability, staff representatives, …) •  Permission from administrative bodies, staff representatives and/or labor court may be required •  In some countries: mandatory severance payment •  In some countries: severance payment may replace observation of notice period

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II. 

Employment Contracts • 

Local law may impose very specific and technical notice requirements, e.g. –  Notice must be in writing, excluding e-mails –  Notice must be given by certain time of month –  Notice must be delivered or sent in specific manner –  Notice of termination restricted if employee is on sick leave (e.g. Italy, Hungary, France)

• 

Minimum notice period may depend on –  Employee s completed years of service and/or –  Contractual arrangements and/or –  Employee s status and/or –  Amount of salary

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III. 

Conclusion

•  European employment contracts subject to common principles, yet national diversity •  European regulations will continue to change European work market

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III. Conclusion / Outlook • 

Free movement of workers –  No work permits or resident visas required –  Stepwise development –  Since 1 May 2011: right to work in any Member State also for citizens of Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Slovenia and Slovakia) –  Widely feared in certain Member States as threat to employment market and salary levels –  In Germany: used as argument for introduction of minimum wages in certain industries

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III. 

Conclusion •  Recent EU-wide Developments

Source: Thosmas Plaßmann, German Law Journal Arbeit und Arbeitsrecht , May 2011, p. 266

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Questions?

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Thank you for your attention! - Dr. Kara Preedy, LL.M., Lic.dr. 7 firms - more than 50 offices - over 750 work law attorneys

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