The practice in the UK of ‘fire and rehire’ (i.e. dismissing an employee and offering them a new employment contract on new terms) as a way to change terms and conditions of employment is lawful, but it has been under the spotlight and subject to increased scrutiny in recent years as cases of misuse by some employers have hit the headlines.

In autumn 2021, legislation curbing dismissal and re-engagement was shelved by the UK government and replaced with a commitment for updated and more detailed Acas guidance. That guidance (which is not binding) focusses on the importance of thorough and constructive consultation with staff to explore all alternative options to terminating employment, describing fire and rehire as ‘a last resort’. By spring 2022, the government announced its intention to publish a statutory code of practice intended to crackdown on the inappropriate use of the tactic, with increased punitive financial sanctions for non-compliance.

That draft statutory code of practice has now been published, and a consultation on its content launched. The consultation closes on 18 April 2023, but the publication of any resulting final version is reliant on parliamentary time allowing its completion.

Key points arising from the draft code are as follows:

  • It sets out guidance and accepted standards on how employers should approach changing terms and conditions, with an emphasis on meaningful consultation, transparency and openness. It says that fire and rehire should be a last resort, and that dismissal should not be used as a threat or negotiating tactic where dismissal is not in fact being contemplated.
  • It applies where an employer wants to make changes to terms and conditions of employment and envisages that if employees do not consent to those changes they might dismiss them and offer re-employment on new terms or engage new employees on the new terms. It does not apply where the reason for the dismissal is redundancy, but it is not immediately clear how this will operate where terms and conditions changes are being explored as an alternative to redundancy.
  • The code applies regardless of the number of employees affected and regardless of the business objectives or reasons for seeking the changes (presumably unless it is a redundancy situation where the code does not apply).
  • There is a big emphasis on ‘meaningful consultation’ (i.e. in good faith and with a view to reaching agreement), and taking all reasonable steps to explore alternatives. If negotiations are not fruitful, the draft code requires employers to revisit their business strategy and plans. The code also reminds parties that Acas can assist with resolving conflict and help with negotiation, although it is unclear whether an unreasonable failure to involve Acas would itself be a breach of the code, or how far a ‘reasonable’ employer would be expected to go in revisiting their strategy.
  • It also promotes transparency and openness in sharing information (the extent of which might usually be reserved for collective consultation where 20 or more employees are affected), and for employers to be honest about dismissal and re-engagement as an option if agreement cannot be reached.
  • It recommends that employers seek to mitigate against the impact of the changes e.g. through a phased implementation, regular reviews, and providing practical support (e.g. relocation assistance, and career and emotional support through coaching/counselling). Again, it is unclear how far an employer would be expected to go to avoid being unreasonably in breach of the code.
  • The code will not be legally binding, but it will be relevant to whether an employee who has been dismissed as part of a ‘fire and rehire’ has been fairly dismissed under UK unfair dismissal laws. In addition, the employment tribunal will have the power to uplift or reduce compensation by 25 per cent where there is unreasonable non-compliance with the code. It is unclear how this penalty will operate, particularly whether the uplift could allow compensation awards to exceed the current financial caps under unfair dismissal law. Assuming the 25 per cent uplift works in the same way as non-compliance with the established Acas statutory code on discipline and grievance, financial penalties would remain subject to existing caps. If this is the case, the proposed new penalty may be more style over substance, unlikely to have much impact on affected staff, nor significantly increase an employer’s financial exposure.

Although the new code will be welcomed by many, it remains to be seen if it will be sufficient to deter abuse of this practice. Employers who operate fire and rehire strategies responsibly will welcome the code as setting out the steps an employer needs to follow in order to fairly dismiss an employee as part of a ‘fire and rehire’.

Parties wishing to comment on the draft code can do so online before 18 April 2023.

Many New Jersey employers, particularly those with fluctuating staffing needs, use temporary workers to supplement their staff. Typically, employers have contracts with staffing agencies who provide workers to meet the Company’s temporary staffing needs.

On February 6, 2023, Governor Murphy signed P.L. 2023 c.10, also known as the “Temporary Workers’ Bill of Rights” which may have a significant impact to these temporary staffing arrangements in business sectors that rely most heavily on them. Specifically, the new law applies to workers in “designated classifications,” as listed by the Bureau of Labor Statistics, including workers in the food preparation, construction, maintenance, repair, production, personal service, and transportation industries, among others.

The Bill’s most controversial provision is one that requires that the temporary employees receive the “average rate of pay and average cost of benefits, or the cash equivalent thereof, of employees of the third-party client performing the same or substantially similar work.” In other words, the temporary employee must make more than the employer/client’s employees because they must receive the cash equivalent of benefits they are not entitled to receive as temporary employees.

With a joint and several liability provision running to the third-party client, this law creates a substantial burden on employers to align the temporary workers’ assignments with their own employee’s roles, compute the average of the amounts earned by their employees (some of which may have significant seniority or other relevant background experience resulting in higher earnings), determine the “average” “cash equivalent” of their employees’ benefits, and then ensure that the temporary employees working in the same roles receive at least this amount.

In addition to the change discussed above, the law also has several additional protections including robust notice requirements, limitations on payroll deductions, and anti-retaliation protections.

The notice and anti-retaliation provisions take effect on May 7, 2023 (90 days from the date the Governor signed the bill into law) and the remaining provisions take effect on August 5, 2023 (180 days after signing).

New Jersey employers who utilize temporary employees to supplement their workforce should consult with experienced labor and employment counsel about these changes. Reed Smith’s Labor & Employment team will continue to monitor these developments and provide updates. Should you have any questions about the requirements under the new law or other issues impacting your work force, Reed Smith’s experienced attorneys are available to assist.

On January 10, 2023, the Illinois legislature passed SB 208, also known as the Paid Leave for All Workers Act, a bill that provides paid leave to virtually all Illinois employees. Governor J.B. Pritzker is expected to sign the bill into law. SB 208 would take effect January 1, 2024.

SB 208 would guarantee Illinois employees up to a minimum of forty hours of paid leave during a 12-month period. Under SB 208, employers would have the option to either require their employees to accrue paid leave throughout a 12-month period or provide all paid leave to their employees on the first day of employment for the 12-month period. Employees would accrue one hour of paid leave for every forty hours worked.

Under the accrual model, employees would be able to carryover their earned and unused paid leave on an annual basis. While SB 208 does not limit how much paid leave employees would be allowed to carryover, it would allow employers to impose a forty-hour limit of paid leave in a 12-month period. Employers that frontload paid leave to their employees would not be required to allow carryover of earned and unused paid leave.

Significantly, SB 208 would allow employees to use paid leave for any reason of the employee’s choosing. Employers would be unable to require employees to provide a reason for the leave or documentation or certification as proof of the leave.

Pursuant to SB 208, employers would be able to impose reasonable paid leave policy notification requirements. Employers would be allowed to require employees to provide seven days’ advance notice of the need for paid leave, if such need is foreseeable, and to provide notice as soon as is practicable, if the employee’s need for leave is not foreseeable. If an employer requires notice for unforeseeable need, it must provide its employees with a written policy that contains procedures for the employees to provide notice.

Notably, SB 208 generally would not require employers to, upon an employee’s termination or separation from employment, pay an employee for any accrued and unused paid leave at the time of termination.

SB 208 would not apply to all Illinois employers and employees. For example, employees and employers would be able to waive the paid leave requirements of SB 208 pursuant to a collective bargaining agreement. Further, SB 208 would not apply to employers covered by a municipal or county ordinance that requires employers to provide any form of paid leave to their employees, such as the Chicago Paid Sick Leave and Cook County Earned Sick Leave Ordinances.

With the likelihood that SB 208 will be signed into law soon, employers should prepare now by reviewing and amending their paid leave policies to conform to these anticipated new requirements, as there are steep consequences for non-compliance. Employers that violate SB 208 would be liable for underpayment and damages to affected employees, as well as civil penalties. And, in a successful civil action, employees would be entitled to their costs and attorneys’ fees.

At the end of 2022, the German Federal Labor Court (BAG) published a decision stating that employers are obliged to introduce a system for recording the total working hours of their employees (BAG, 1 ABR 22/21). Up to now, the Working Time Act (ArbZG) has not contained an explicit obligation to record the working hours of all employees, except for overtime. The BAG thus confirms the decision of the European Court of Justice (ECJ) from 2019, according to which all EU member states are obliged to require all employers to introduce an “objective, reliable and accessible system” documenting the work performance of their employees (ECJ, C-55/18). In its decision, the BAG bases the obligation to introduce a time recording system by the employer on the provision in Sec. 3 (2) No. 1 Occupational Health and Safety Act (ArbSchG), which states that the employer must enable “suitable organization” and provide the necessary resources for this.

Employers and the German legislator are expected to act in response to the BAG’s decision on the recording of working hours. The German Federal Ministry of Labor and Social Affairs (BMAS) has announced that it will present a proposal for including the obligation to record working hours in the Working Time Act in the first quarter of 2023. However, employers should start dealing with the new requirements now and not just wait for the legislator to pass a new law as the new case law on the obligation to record working hours is binding with immediate effect. Employers should therefore pay particular attention to the following:

  1. Employers should start to either work on implementing a working time recording system that records start, end, and total duration of daily working time as well as breaks or they should check their existing time recording system for compliance with the new requirements.
  2. Case law does not stipulate any requirements with regard to the type and form of recording of working hours. This means that employers are largely free to choose the type and form of the time recording system itself (e.g. whether electronic or not).
  3. Employers can delegate the recording of working hours as such to their employees. However, since the employer is responsible for setting up and operating a working time recording system, they must also encourage employees to use the system in practice. For this purpose, employers should sufficiently instruct their employees and inform them which times are to be recorded as working hours. The correct use of the time recording system should also be monitored regularly.
  4. Companies with a works council must involve them in the decisions around the arrangement (the “how”) of a working time recording system as the works council has participation rights in this respect.
  5. Employee data protection must also be taken into account when establishing a time recording system, as time records are considered personal data and must be treated in accordance with the essential data protection principles (e.g. data minimization, storage period, international data transfer).

With regard to flexible working models, such as trust-based working or working from home, no significant consequences are to be expected in the future: trust-based working time means that employees are responsible for planning their own working hours and must ensure that they comply with the amount of time agreed with the employer. Even before the new case law on time recording, the general conditions of the Working Time Act already applied here. The obligation to record working time means that in the future, the working time itself must be documented, but flexible working time arrangements remain generally feasible. This means that if employees have access to a working time recording system from home to record their working hours, the requirements of the new case law are still met.

Continue Reading BAG decision on the obligation of German employers to record working hours

The National Union of Teachers has announced industrial action across England and Wales during February and March over disputes concerning pay, with national strikes on 1 February and 15 – 16 March, and several other regional dates. Scotland is also facing a rolling programme of teaching strikes until April.

With over 23,000 schools affected across England and Wales, the potential disruption for working parents and their employers should not be underestimated, especially as we do not know how long the strike action will continue. The Strikes (Minimum Service Levels) Bill is currently making its way through parliament which, if enacted, will allow minimum service levels to be required in certain sectors (including education) during periods of industrial action. This could reduce the impact of teaching strikes on working parents and their employers, but it is not law yet and will not completely eradicate the disruption even if or when it is.

Instead, employers should prepare for disruption over the coming months and consider the effects on their parent employees and other staff. Employers who anticipate the challenges faced, engage early to facilitate a solution, and plan for the longer term rather than simply the currently announced strike dates, will be best placed to minimise the impact in the workplace. Employers should also keep in mind that employees may only receive very short notice of school closures or adapted arrangements, with teachers not required to inform their employer if they intend to strike, making advanced planning more difficult in some cases. Teachers’ own childcare issues during the strikes may also impact the ability of certain schools to stay open which again, may be an issue that arises at the last minute.

Of course, occasional school closures do happen (snow days, for example, are not uncommon in winter months), and employers will be well versed with managing the knock-on impact on working parents and managing requests for, for example, emergency leave, unpaid leave, annual leave, time off in lieu (TOIL), and flexibility (such as working at home or adjusted hours of work). Strike days are, in many ways, no different but there are a few particular points to remember, plus the regular and widespread nature of the planned action provides both employees and employers with an opportunity to plan ahead.

Continue Reading Teacher strikes: How UK employers can mitigate workplace disruption

For decades, businesses within New York State have been required by federal, state and, in certain cases, local law to physically post various notices and posters in the workplace. However, last month Governor Kathy Hochul signed into law Senate Bill S6805, which mandates that Empire State employers now also make any legally-required notices and posters available electronically. The bill took effect immediately.

Specifically, the new law requires that New York State employers post notices and posters on their website or circulate them to employees by email. Employers must also notify employees that the required notices and posters are available electronically. The notices and posters subject to the law are the same as those that must be physically posted on-site as required by both state and federal law (e.g., posters on minimum wage, notice as to New York’s whistleblower law, and the like). The law and related legislative comments are silent on whether this requirement applies to local or city law notices and posters.

To ensure compliance with the new law, New York employers should: (1) confirm that all required notices and posters are posted on-site; (2) prepare digital versions of the notices and posters; (3) notify employees that the notices and posters are also electronically available; and (4) circulate the digital versions of the notices and posters in compliance with Section 201.

Pursuant to a Bill recently signed by New Jersey Governor Phil Murphy, the long-delayed changes to New Jersey’s mini-WARN Act will take effect on April 10, 2023. Employers in New Jersey contemplating a mass layoff, transfer of operations or termination of operations that will impact 50 or more employees (regardless of part-time or full-time status) will now be subject to an enhanced notice period (90 days) and mandatory severance payments to impacted employees, along with other changes to the prior law.

Governor Murphy first signed these amendments to the law three years ago (January 2020). However, the COVID-19 pandemic delayed the effective date of the changes until 90 days after Executive Order 103 (setting forth the state of emergency related to the pandemic) was lifted. Although Executive Order 103 remains in place, Governor Murphy signed new legislation earlier this month putting the WARN Act changes into effect on April 10, 2023.

As we previously discussed here, here and here, employers should note the following key changes to the law:

  1. Lower threshold to trigger NJ WARN
    • Currently, the WARN act is only triggered if an employee impacts 50 or more full time employees working at a single establishment.
    • The new amendments remove the “full time” qualifier, includes employees “reporting to” the establishment (which may address remote employees), and broadens the definition of “establishment” so that it can include multiple locations throughout the state of New Jersey.
  2. Increased notice obligations
    • The current version of the law requires sixty (60) days of notice to employees.
    • The amended version of the law increases that time period to ninety (90) days.
  3. Mandatory severance
    • The current version of the law only provides for severance if an employee does not receive the required notice.
    • The amended law requires that every employee receive both notice and severance. Severance amounts must be at least one week of pay for every year of service, or a higher amount as provided by a collective bargaining agreement or other contract or policy.
    • If the employee does not receive the full 90 days of notice, they must also receive an additional four weeks of severance.
    • The law also expands the definition of “employer” with respect to who may be responsible for the severance payments to include affiliated entities and individuals.

Although the law takes effect on April 10, 2023, it is unclear how the law will operate with respect to terminations already contemplated and/or noticed under the prior WARN Act prior to the effective date, but which terminations will not occur until after April 10, 2023. Employers facing these types of situations should discuss with legal counsel.

Lastly, stay tuned for further updates as the law is challenged and interpreted in the Courts. The ERISA Industry Committee already filed a challenge to the law in the U.S. District Court for the District of New Jersey, arguing that the severance obligations are preempted by the Employee Retirement Income Security Act. This litigation remains pending under docket number 3:20-cv-10094.

Reed Smith’s Labor & Employment team will continue to monitor these developments and provide updates. Should you have any questions about the requirements under the new law or other issues impacting your work force, Reed Smith’s experienced attorneys are available to assist.

2023 looks set to be a year of significant change for HR professionals with the progression of new and reformed laws proposed and backed last year. Here are some of the key legislative/policy developments to watch out for:

Flexible working – Changes to the statutory flexible working regime are expected. The new rules will extend the right to request flexible working to all employees from day one of employment. Employees will be allowed to make two requests in a 12-month period (rather than the current limit of one) and employers will have less time to respond (two months, not three). For more information, see our previous Employment Law Watch blog.  

Carer’s leave – A new statutory right for carers to take a week’s unpaid leave per year is proposed. The leave is intended to be used to take planned time off (rather than emergency leave) to undertake caring responsibilities.   

Neonatal leave and pay – A new statutory leave is proposed which will allow parents of sick or premature babies to take up to 12 weeks’ paid leave on top of any maternity or paternity leave entitlement. The leave is proposed to be a day one right for new hires and to apply to those parents whose babies need to be in hospital in the first 28 days post birth with continuous stays of seven days or more. 

Continue Reading 2023 – All change for UK employment law?

On December 21, 2022, New York Governor Kathy Hochul signed the Warehouse Worker Protection Act (WWPA) into law. The WWPA is intended to protect warehouse workers from unreasonably demanding work quotas and goes into effect on February 19, 2023.

As detailed in this post, the WWPA establishes new requirements for distribution centers to disclose work speed data to current and former employees and to inform workers about their performance and rights in the workplace. The law also protects workers from adverse employment actions because of a failure to meet undisclosed speed quotes or quotas that do not allow for proper breaks. Some key aspects of the WWPA are as follows:

  • Which employers are covered? The WWPA applies to employers with 100 or more employees at a single warehouse distribution center or 500 or more employees at one or more warehouse distribution centers.
  • How does the WWPA define “quotas”? The law defines quotas as a “work standard” that either “(a) an employee is assigned or required to perform: (i) at a specified productivity speed; or a quantified number of tasks, or to  handle or produce a quantified amount of material, within a defined time period; or (b) an employee’s actions  are  categorized between time performing tasks and not performing tasks, and the employee’s failure to complete a task performance standard or recommendation may have an adverse impact on the employee’s continued employment or the conditions of such employment.”
  • Requirement to provide written description of quotas:  The WWPA requires covered employers to provide to each employee, upon hire, or within 30 days of the effective date of the law, a written description of each quota to which the employee is subject and any potential adverse employment action that could result from failure to meet the quota. If there are any changes to the quota thereafter, the employer shall, within two business days of the change, provide an updated written description of each quota to which the employee is subject. If an employer takes an adverse employment action against an employee, the employer shall likewise provide that employee with the applicable quota for the employee.
  • Recordkeeping obligations:  The WWPA requires that employers maintain records of the following: (a) each employee’s own personal work speed data; (b) the  aggregated work speed data for similar employees at the same establishment; and (c) the written descriptions of the quota such employee was provided.
  • Anti-retaliation provision:  The WWPA also prohibits employers from retaliating against employees exercising their rights under the law. If employees exercise their rights in “good faith,” subsequent actions are presumed to be an “adverse action against an employee [if taken] within ninety days of the employee’s engaging or attempting to engage in activities” protected by the WWPA.
  • Enforcement:  The law provides that the Commissioner of Labor shall create rules or regulations and adopt civil penalties to give effect to the WWPA. The Attorney General also has authority to prosecute civil and criminal actions under the law.

All covered employers should carefully review the WWPA to ensure they understand its requirements and take all necessary steps to comply before the law’s effective date.

As we discussed in an October 2021 article regarding the future of restrictive covenant agreements in the U.S., President Biden in July 2021 directed the U.S. Federal Trade Commission (FTC) to explore potential ways to limit the use of non-compete agreements. On January 5, 2023, the FTC followed through on the President’s directive by proposing a new rule that would effectively ban such agreements.

In short, the FTC’s proposed rule deems it an unfair method of competition for an employer to:

  • Enter into or attempt to enter into a non-compete clause with a worker;
  • Maintain a non-compete clause with a worker; or
  • Represent to a worker that the worker is subject to a non-compete clause where the employer has no good faith basis to believe that the worker is subject to an enforceable non-compete clause.

Notably, the proposed rule takes a broad view as to what constitutes a “non-compete clause.” To start, the FTC defines such a clause as “a contractual term between an employer and a worker that prevents the worker from seeking or accepting employment with a person, or operating a business, after the conclusion of the worker’s employment with the employer.”

The definition does not end there. The proposed rule then goes on to state that the term non-compete clause also “includes a contractual term that is a de facto non-compete clause because it has the effect of prohibiting the worker from seeking or accepting employment with a person or operating a business after the conclusion of the worker’s employment with the employer.” The FTC provides the following examples of potentially de facto non-compete clauses:

  • A non-disclosure agreement between an employer and a worker that is written so broadly that it effectively precludes the worker from working in the same field after the conclusion of the worker’s employment with the employer.
  • A contractual term between an employer and a worker that requires the worker to pay the employer or a third-party entity for training costs if the worker’s employment terminates within a specified time period, where the required payment is not reasonably related to the costs the employer incurred for training the worker.

The proposed rule would bar future workplace non-compete clauses with any paid or unpaid workers, including employees, independent contractors and interns. It would also invalidate any preexisting non-compete clauses and would in fact require business to (i) rescind such preexisting clauses and (ii) notify workers of the same in an individualized written communication. The same notification requirements would likewise apply with regard to former workers who remain bound by non-compete clauses, so long as the employer has the worker’s contact information readily available.

The lone exception to the proposed rule is for non-compete clauses that are “entered into by a person who is selling a business entity or otherwise disposing of all of the person’s ownership interest in the business entity, or by a person who is selling all or substantially all of a business entity’s operating assets, when the person restricted by the non-compete clause is a substantial owner of, or substantial member or substantial partner in, the business entity at the time the person enters into the non-compete clause.”

The proposed rule is far from being final and is merely the first step in the regulatory process. Once the proposed rule is published in the Federal Register, a 60-day public comment period will ensue. That said, employers will want to monitor the progress of the proposed rule over the coming months, as it could present a seismic change to the U.S. business landscape.