NLA Approves Draft Amendment to LPA
On 13 December 2018, the National Legislative Assembly ("NLA") approved the draft amendment to the Labour Protection Act (“Draft”). The Draft will be submitted for endorsement by His Majesty the King and, subsequently, published in the Royal Gazette before it becomes effective. It is expected that the Draft will become effective sometime late January or early February 2019, though no specific timeline has been set as of yet.
At this stage, since the Draft has only been approved recently, its final text has not yet been released to the general public. However, we do not expect substantial changes to the Draft from the original version proposed to the NLA in August 2018.
Below are summaries of the main revisions to the current Labour Protection Act ("LPA") based on the August 2018 version of the Draft:
- 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 LPA only requires that employers arrange for a certain number of days of business leave for the employees with or without pay as the employers deems appropriate. The Draft is still silent on the definition of business leave, and employers are still free to set definition of business leave and its scope as deemed appropriate.
- Maternity leave has been clarified to include leave taken to visit doctors for pre-natal care.
- Maternity leave will now be capped at 98 days per pregnancy inclusive of holidays, an increase from 90 days under the current LPA.
- 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. This would mean 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%, an increase from the current 7.5%; – 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 in 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 the relocated 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.
Due to the substantive changes to the current LPA and the amended provisions under the Draft still being relatively new, it remains to be seen how each provision within the Draft will be interpreted and implemented by officials and courts in practice. It is essential that employers carefully study the Draft regulations to ensure their employment policies are consistent with the Draft regulations, especially in areas where the Draft may distinguish from existing court precedents, for example, in mergers and acquisitions where an employee’s consent is required and a new employer must assume all existing rights and obligations of the previous employer.
- Employers are required to make the special severance pay or special severance pay in lieu of advance notice to the employees within seven days from the cessation date of the employment agreement.