Covid-19: Employment Law Compliance issues for Multinationals in Asia

Multinationals in Asia are deep into one of the most challenging business environments in decades as a result of the Covid-19 pandemic. Although the focus is shifting away from Asia, with China bringing the number of infections under control, attention has moved to the Middle East, Africa, North America and Europe – and now Italy finds itself in the eye of the storm. The head of the World Health Organization says the world is in “uncharted territory” as this dangerous and rapidly spreading disease causes serious outbreaks around the world.

The pandemic presents unique employment law challenges for in-house counsel and HR professionals who are acting in a situation without much precedent. Businesses are considering what they can do to minimize any risk to health and safety and support staff through this challenging period where anxiety and uncertainty is rife, while at the same time complying with their employment obligations and maintaining business continuity.

  1. Health and Safety

Naturally, health and safety is at the front of these concerns. Employers have a duty to safeguard the health and safety of their employees, so far as is reasonably practicable. Some countries have extensive legislative frameworks in place, while others impose obligations at common law. Many (including Hong Kong) have specific requirements to prevent infectious diseases and the steps employers must take.

Under the Occupational Safety and Health Ordinance (Cap. 509, together with its subsidiary regulations), employers in Hong Kong are generally subject to a duty to:

  • provide information, instruction, training and supervision as may be necessary to ensure the safety and health of employees at work
  • maintain the workplace in a condition that is safe and without risks to health where the workplace is under the employer’s control
  • provide or maintain a working environment for employees that is safe and without risks to health.

The above duties apply to employees but may also apply to other third parties working on or visiting the employer’s premises: customers, agency staff, independent contractors and other atypical workers.

Failure to comply with the above duties can present personal (and, in some cases, criminal) liability for managers, directors and other officers if the failure is due to their wilful neglect.

A detailed plan can help employers and managers to comply with these common law and statutory obligations, by evidencing the steps the company has taken to try to protect against an outbreak at work and what steps will be followed in order to minimise and mitigate against its impact. Such a plan should extend to cover:

  • flexible working arrangements and quarantine protocols (as discussed below)
  • keeping employees fully up to date with the current situation, any major developments and the contingency plans which are being put in place at any particular stage
  • provision of preventative measures (masks and sanitisers, increased cleaning of office premises etc.)
  • guidance for employees on travel arrangements to/from affected areas
  • notification procedures and protocols if anyone feels unwell
  1. Mandatory Government Quarantine

Many governments have implemented restrictions barring entry to those with recent travel history through highly affected countries. The situation continues to change on a regular basis.

Hong Kong currently has mandatory 14-day quarantine measures in place for anyone entering from Mainland China, Iran and the regions of Emilia-Romagna, Lombardy and Veneto in northern Italy in the 14 days prior to arrival. Hong Kong residents returning from Daegu and Gyeongsangbuk-do in South Korea are also subject to the same measures.

Starting from midnight on 14 March 2020, these measures will be extended to those arriving from the following locations in the 14 days prior to arrival in Hong Kong: Bourgogne-Franche-Comte and Grand Est regions in France; North Rhine-Westphalia in Germany; Hokkaido in Japan; La Rioja, Madrid and Pais Vasco in Spain; and the whole of Italy.

If an employee is required to remain in quarantine, a public health officer will issue them with a quarantine order and a medical certificate.

Anyone caught violating the terms of the quarantine order without the permission of the public health officer is liable on conviction to a fine of HK$25,000 and to imprisonment for up to 6 months.

Giving false or misleading information to a public health officer is also an offence and punishable to the same extent.

In the event an employee is placed under mandatory quarantine, employers need to be mindful of the following:

  • Employees should be required to inform the business as soon as possible if they are subject to mandatory quarantine. If so, they should be required to provide a copy of the terms of the applicable quarantine order and any medical certificate
  • If the individual is issued with a medical certificate, general sick leave principles should apply and an employee should be treated as being on sick leave during the quarantine period unless the employee confirms they are well and willing to work from home
  • If the employee experiences symptoms or is diagnosed by the public health officer as having contracted the virus during the quarantine period, they should be required to notify the employer as soon as possible
  • If the employee’s quarantine period is extended, they should notify the employer as soon as possible and provide a copy of the terms of any new quarantine order and/or medical certificate (if applicable)
  1. Employer Mandated Quarantine

Employees can be required not to report for work if they are likely to pose a threat to the health and safety of other staff members. The scale of any threat needs to be assessed on a case-by-case basis, but employers are generally taking greater precautions for staff who have: (i) travelled from/to highly affected areas (including Mainland China, South Korea, Iran or Italy); or (ii) been in contact or close proximity with anyone experiencing flu-like symptoms or who are known to have contracted the virus.

During any employer-mandated quarantine period, the starting position is that employers would be expected to continue to pay the employee their ordinary wages and contractual benefits – provided they are otherwise ready and willing to work. But this may depend on the location and whether the premises need to be shut down completely.

Statutory provisions exist in the case of business closures and business suspensions in Thailand and South Korea respectively. In these cases, however, the closure or suspension must be due to a “legal necessity” (Thailand) or a reason that is “attributable to the company” (South Korea). It is unlikely that a closure/suspension due to Covid-19 would fall within this category, and therefore the obligation to pay wages would likely continue.

In Japan, there are conflicting provisions in the Labor Standards Act and the Civil Code as to whether employees should receive 60% of their wages or 100% of their wages in the event of a business closure.

Given the various conflicting regimes, the prudent view is generally to continue to pay staff their regular wages during any period of quarantine provided they are otherwise ready and willing to work.

If the employee has contracted the virus or is unfit to come to work, they would be expected to first utilize their sick leave entitlement – whether statutory or company enhanced.

  1. Leave Arrangements

Employers and employees are generally free to take periods of voluntary leave as agreed, whether on a paid or unpaid basis. Unpaid leave arrangements have proved popular for some businesses, with many staff opting to take time off to spend time with families in return for reduced working hours and reduced compensation. The arrangement can be beneficial for employers and employees, provided the communication is handled sensitively. 

Employers should, however, be mindful that any pre-booked annual leave which takes place during a business closure due to Covid-19 may not be viewed as annual leave. Strictly speaking, the leave needs to be in respect of the day on which the employee was actually required to report for work. This is the case, for example, in Hong Kong, Japan and Thailand.

  1. Flexible Working

The Hong Kong Labour Department has issued guidance encouraging employers to be considerate and to make flexible arrangements, for employees to work from home or granting them paid leave where practicable. Similarly, employers are encouraged to be compassionate and to consider granting paid sick leave even if an employee does not technically meet all of the statutory requirements to be eligible to claim sickness allowance under the Employment Ordinance (Cap. 57) (e.g. where the employee has not accumulated a sufficient number of paid sickness days). This guidance is currently non-binding, but we anticipate that the Labour Tribunal would generally expect employers to comply with it if challenged in the event of a dispute.

Multinationals in Asia appear to have embraced this change by-and-large. Flexible working policies have been pushed to their limit, particularly for those who are able to work from home and/or are in non-critical business positions. If staff are being allowed to work from home, they should be advised to keep in regular contact with their supervisors and/or HR, and to notify the business in advance. 

  1. Travel Restrictions

South Korea is currently the only country for which the Hong Kong Government has imposed a blanket travel ban on any inbound non-Hong Kong residents. Returning Hong Kong residents are subject to mandatory quarantine as set out above.

For outbound travel, the Hong Kong Government has issued a Red Outbound Travel Alert on the highly affected areas set out above (Bourgogne-Franche-Comte and Grand Est regions in France, North Rhine-Westphalia in Germany, Hokkaido in Japan, La Rioja, Madrid and Pais Vasco in Spain). The previous Red Outbound Travel Alert that applied only to Italy’s Emilia-Romagna, Lombardy and Veneto regions has been extended to cover the entire country.

Multinational employers are following these guidelines, and some are dissuading any non-essential business travel around the Asia Pacific region.

Employers should ensure that their list of regular business travellers and contact details is accurate and up to date. Clear communication channels should be established (both during and outside office hours) as part of the business contingency plan.

  1. Employee Relocations

Many employees are asking to work from other office locations overseas. Subject to any particular contractual arrangements, employers are not generally obliged to permit an employee to perform their duties from another location, either on a temporary or permanent basis. For many employers, such requests cause challenges around business continuity, ability of employees to perform their duties from different time zones, and/or perceptions of unfairness if certain categories of employees are permitted to do so while others are not. Longer term arrangements also carry the risk of unforeseen consequences such as tax liabilities (both on the individual employee and the company), visa issues and dual employment rights in both the original and new place of work.

It is prudent to consider the likelihood of such requests as part of business continuity planning and to have protocols in place as to which roles will be considered and what the expectations are around working arrangements during any period of overseas working. Employers should also analyse on a case-by-case basis whether there are likely to be any tax or other issues arising out of the change in working location, and ensure the arrangement is properly documented to minimise the risks of later disputes and legal risk.

  1. Discrimination

Employers do need to be mindful that they do not breach any discrimination laws in their handling of staff during the outbreak. For example, in Hong Kong ‘disability’ is defined broadly under the Disability Discrimination Ordinance (Cap. 487) and could even include Covid-19. In such cases, an employer is under a duty not to subject the employee to less favourable treatment as a result of their condition.

However, a number of defences or exemptions are often available and, typically, these will include cases where a discriminatory action was reasonably necessary to protect public health. This would include: (i) complying with quarantine measures; and (ii) taking precautions against the spread of infectious disease.

As with any risk of discrimination (or perceived discrimination), it is key for employers to develop a contingency plan that applies equally to all staff regardless of any underlying protected characteristics and to ensure the policy is implemented consistently.

  1. Employee Compensation and Insurance

In countries with statutory workplace injury regimes, it may be possible for an employee to claim compensation if they have contracted the virus in the course of performing their employment duties. Such claims are usually settled through mandatory employees’ compensation insurance.

On 10 February 2020, the Hong Kong Labour Department confirmed it is considering whether Covid-19 should be designated an “occupational disease” within the meaning of the Employees' Compensation Ordinance (Cap. 282). If so, this would make it easier for eligible employees who have contracted the disease to bring claims under the ECO framework as they would not have to prove they had suffered an “injury by accident” or to bring any form of personal injury claim – such claims are more difficult and complex to sustain in practice. However, the Government has made clear it will take some time for an amendment to the ECO to be tabled and ultimately passed.

In the meantime, employers should contact their employees’ compensation insurance providers to check that claims associated with Covid-19 are sufficiently covered, or if any updates to their policy are required.

  1. Counting the Cost

As businesses deal with the fallout, attention will inevitably turn to cost-cutting measures. This may involve looking at unpaid leave arrangements (discussed above), but it will also involve consideration of downsizing and reduction of headcount.

There are no statutory requirements in Hong Kong regarding the process for implementing redundancies/retrenchments. Generally speaking, they are viewed as a termination of employment in the ordinary course. However, it is important to ensure that any selection criteria are broadly fair and do not discriminate against any employee or pool of employees on the basis of a protected characteristic. There are also certain protected categories of employee who cannot be dismissed under any circumstances e.g. pregnant employees, employees on paid statutory sick leave.

Other countries may have in place more onerous requirements, so it is important for multinationals to check that any cross-border redundancy process is compliant with local law. In particular, there may be collective consultation obligations or a requirement to implement redundancies according to the ‘last in, first out’ principle. The amount of statutory severance due to eligible employees is also relatively low compared to other countries.

This is, however, subject to any contractual policies that an employer has in place which go above and beyond the statutory minimum requirements. Employers will be expected to comply with such policies and should be reviewing their terms now in order to identify any gaps between the policy and local statutory minimum requirements.

As an alternative, some employers are considering offering staff voluntary redundancies on the basis of an enhanced redundancy package, or redeployment to other parts of the business (both within and outside Hong Kong). This can be an attractive option for certain employees, particularly those who have been long-serving. However, it is critical to ensure that staff communications are drafted sensitively as the reputational risks are extremely high in the current environment.

Conclusion

There is no doubt that Covid-19 is stretching multinationals to their limits. And yet innovation is often borne out of such growing pains. Although the mass remote working experiment has come as a shock to the system, businesses have adapted – we may look back on this period as paving the way for remote and agile working practices to become an integral part of the workforce rather than a token gesture. Indeed, with a small landmass and an economy driven largely by professional services, Hong Kong may be better placed to cope with these effects compared to other jurisdictions.

Employee health and safety is well and truly back up the corporate agenda, with businesses being forced to consider the welfare of all staff and ensure their needs are being met (both physical and mental).

And business continuity plans are being revisited, polished and made fit for purpose for a new decade.

Hong Kong is no stranger to pandemics. While we must not underestimate the disruptive impact Covid-19 has had and continues to have in Hong Kong and around the world, equally we must not underestimate the resilience of the Hong Kong business community.

Partner and Head of Employment, DLA Piper, Hong Kong