Had a long conversation with an old friend the other day regarding layoffs. This friend is an international attorney for a big company (not in employment law) that is going through layoffs throughout the world. My friend was bemoaning this fact and together we bemoaned how complicated it is for international companies to manage a global workforce because the laws are so different around the world. We also, of course, bemoaned the horrible economic situation companies and people are facing pretty much everywhere.
A lot of what we discussed was how easy it is to terminate employees in the United States and how that has negatively impacted the United States during the pandemic. We talked of how some European countries (Denmark for instance) had essentially paid employers to keep their employees on reduced salaries. We both liked that because it meant far fewer unemployed and thus far fewer people with no income but for unemployment compensation, which typically does not last long. But then we talked about how the United States had stepped up by boosting unemployment compensation by $2400 a month and how there are even some people in the United States making more on unemployment than they did while working, but that is also because the minimum wage in some U.S. states is so low. For example, Georgia’s minimum wage is a shockingly low $5.15 an hour.
Then we talked about how the United States is one of the few countries with “at will employment” which means essentially that employers can, with some exceptions terminate an employee for a good reason, a bad reason, or no reason at all, but because of lawsuits, it is common for employers to pay severance in return for the employee agreeing not to sue.
Then he told me how in Malaysia, employers virtually always select employees for layoffs based entirely on the “last in, first out” principle — the newest employees are the first to be terminated. He then talked about the pros and cons of such a system. He said this made layoffs relatively simple and non-contentious, but this also meant that really good employees with relatively low salaries are let go while mediocre employees with higher pay are forced to be kept on. So Malaysia has chosen clarity and simplicity over efficiency, but then again, clarity and simplicity can be seen as their own efficiencies.
And then there is China….
In China, the rules around layoffs and terminations are incredibly complicated and they even can vary tremendously by locale. It is also incredibly common for terminated and laid off employees from foreign companies to sue their former employer and prevail based on some incredibly picayune national or even local rule. You failed to get your employee to sign the termination notice? The termination is invalid. You terminated your employee and then paid for unused vacation time, rather than the other way around? Your termination is invalid? You terminated your employee for stealing and that is not a terminable offense listed in your Employee Handbook? The termination is invalid. We together made up these examples and neither of us know if they are real or not, but the fact that they very well might be should be reason enough for you to be ultra-careful with your China terminations. See China Employee Terminations: Unilateral is Tough.
We ended up agreeing that operating internationally will always be complicated and how it is never possible for any company to have extensive in-house knowledge regarding the specific laws of every country. Rather, the key is knowing the right questions to ask before making big decisions and knowing the right people to consult for localized legal expertise. We then
On the employment law front, we essentially agreed that the big questions to ask before engaging in employee layoffs are the following:
- Are there any laws or statutes or even local rules that specify the selection criteria for layoffs?
- Are there any laws or statutes or even local rules that specify which employees might be protected from being laid off?
- Do your employees have a collective bargaining agreement and, if so, what does it say about layoffs?
- Do your employees have written contracts (in almost all countries they should) and what do those say about layoffs?
- Do you have an Employee Manual or a Company Handbook or a set of Employer Rules and Regulations and, if so, what does that say about layoffs and what does that mean for your particular country?
- Are there any employees that should for any business reason not be laid off and if you do not lay off those employees will that require you to not lay off other employees that you would like to lay off and how will all this impact your layoff decisions. In other words, it is important that you not forget the ramifications to your business of who you lay off.
In other words, this stuff is complicated wherever you are.
Update: A Mexico-based lawyer friend of mine just sent me the following from the New York Times Briefing today:
Much of the rest of the world — including Australia, Britain, Canada, France, Germany and South Korea — has followed one strategy on coronavirus stimulus. Governments have temporarily paid the salaries of workers in order to prevent millions of layoffs.
The United States has taken a different path. It created a complicated mix of different stimulus policies, including loans to businesses and checks for families. This approach doesn’t appear to be working: The U.S. has had a sharper rise in unemployment than other countries. Many jobless Americans have also lost their health insurance — in the midst of a pandemic.