Roundtable: Management Labour & Employment
Three of the world's leading management labour and employment lawyers discuss the key issues and developments affecting their practice today.
Participants
Anders Etgen Reitz
Magnusson
Denmark
Funes de Rioja & Asociados
Argentina
Paul Hastings Janofsky & Walker LLP
USA
Areas of Work
Who’s Who Legal: In view of the current economic turbulence, what issues have risen to the top of clients’ agendas?
Paul Grossman: Wage-hour class actions. It is frequently almost impossible for clients to tell who can be paid a salary for all hours worked (and is therefore exempt) and who must be paid overtime. Our laws are absurd. There should be a bright-line test based on earnings. Everyone in a white-collar job who earns over an annualised X dollars per year is exempt; everyone who earns below that amount is not exempt.
Ignacio Funes de Rioja: The economic turbulence did not generally hit as hard in South America as it did in Europe and the US. South American economies are already growing again.
However, some multinational companies had to implement some decisions across the globe, regardless of the particular economic conditions of certain markets. This situation created some conflicts, especially because some countries have high levels of inflation and in Argentina, for example, the government encourages salary increases as a way to accelerate the recovery of the economy. In this sense, companies covered by national-level industry collective agreements had been increasing their salaries in Argentina, where in general the worldwide policy was of reducing salaries.
In addition, in Argentina, companies that communicated their need to reduce jobs due to the crisis were offered financial and economical assistance by the government, as long as they did not terminate employees.
Anders Etgen Reitz: Restructurings, and information and consultation obligations, have been the focus of most companies. Changing terms and conditions, like the ability to freeze salaries, suspend bonus schemes, etc, have been subject to many questions from clients. These areas are fairly complex in most European countries, and pose difficulties when companies try to adapt to the market situation.
Regulatory Changes
Who’s Who Legal: Several of the lawyers we have spoken to have seen regulatory changes in their jurisdictions – there have been new regulations or a change in the relative intensity of scrutiny or enforcement by authorities. Is this also true of your jurisdiction? If so, what challenges has this presented for labour and employment lawyers?
Anders Etgen Reitz: Many countries have implemented restrictions on bonus schemes and share incentives for senior management. In some countries the restrictions have been limited to the banking industry, while others have experienced more general regulation. The latest changes have required some companies to revise their bonus and stock option schemes.
Paul Grossman: A major focus of the Obama administration will be in the area of pay equity. New laws and regulations will require major employers to re-evaluate their wage policies.
Ignacio Funes de Rioja: Contrary to the tendency in other jurisdictions, Argentina has passed a new law making certain individual rights unwaivable. This means that companies are no longer allowed to reduce certain employment conditions in times of crisis. This reform has been widely criticised since it creates major inflexibility and eliminates tools to preserve jobs during difficult times. The labour authority has also been very restrictive in allowing companies to open crisis-preventive procedures for mass terminations. Consequently, there were no restrictions on bonus payments, share incentives, etc.
Finally, the Supreme Court and some lower courts have ruled in favour of union representatives that were not officially recognised as the most representative of their activity, and this might imply the beginning a major change in the labour relations model.
Billing Arrangements
Who’s Who Legal: One trend that has been mentioned by lawyers across all of the practice areas we cover is that clients are seeking ways to keep their legal costs down. In your view, what is the best strategy to deal with this change?
Anders Etgen Reitz: The focus should, as always, be on adding value to the client. In this context the fee should reflect the value added. Clients are currently looking for creativity in the billing arrangements, which reflects the value-adding principles. Alternative fee arrangement may often be the solution that clients are looking for, and the firms that are creative and client-focused experience a really competitive advantage in the current market.
Ignacio Funes de Rioja: We have for many years been trying to align our interest with that of the client, encouraging efficiency. Therefore, with most clients our fees are much more related to the results of our work than to the number of hours and how many lawyers were involved. In addition, in times of crisis, the client needs support and foresight. Therefore, I think that, with the best interests of clients and efficient professionals in mind, it is better to go beyond the hourly fees and seach for fee schemes that capture the real value of the professional services rendered. These schemes tend to be far removed from hourly fees and more related to the kind of project involved, resources needed, risks, contingencies, results and client satifaction.
Paul Grossman: I very much like the concept that if things go badly, the law firm should share in the pain, and if they go well, in the gain. If one can quantify desired results in advance, a low fixed fee and bonus levels based on results work. If not, I like what I call “20 per cent up or down” for a piece of litigation. After it is over, the client decides if it was a “win”, a “loss” or something in between, based on three factors: 1) result, 2) service and 3) hours (efficiency). If a loss, the client claims a discount of up to 20 per cent. If a win, the client awards us a bonus of up to 20 per cent. The client’s decision is final.
International Challenges
Who’s Who Legal: Many of the clients represented or advised by the lawyers in these pages are multinational companies who may need solutions to challenges in several jurisdictions. What is the firm model most suited to catering for this need?
Ignacio Funes de Rioja: At Funes de Rioja & Asociados we believe labour and employment matters require a very high level of specialisation. Therefore, being a niche firm that only works for the employers, we work in five teams covering all areas of human resources law. Two of these teams are focused on advising multinational companies on transnational matters. We take part in major international conferences and are actively involved at the International Labour Organization, the IBA, the ABA, OAS, IOE, etc. Since we consider ensuring a high quality of service to have become a major issue, we have been ISO 9001-certified since 2001. Also in 2001 we were invited to join Ius Laboris, an exclusive HR law international alliance.
Anders Etgen Reitz: The Magnusson strategy is to cover the Baltic Sea region as a full-service law firm. The regional coverage enables the firm to service multinational companies in several countries on a one-stop-shop basis. In addition Magnusson has built and developed a global non-exclusive network of leading law firms, which allows the firm to handle matters in most countries without difficulties.
Paul Grossman: Paul Hastings has an extraordinary talent in our NY office whose specialty is purely and simply international employment law. Erika Collins is not only very knowledgeable about the most important laws in the most important international venues, but she has a carefully cultivated directory of the top management employment lawyers in virtually every area in the world where we do not have an office. She works with her contact in the country at issue to deliver the necessary advice to multinational companies.
Development of the Practice Area
Who’s Who Legal: To what extent is labour and employment law a “stand-alone” practice within your firm? Has this practice area increased or decreased in importance as a result of the financial crisis?
Paul Grossman: The Paul Hastings employment law practice is a stand-alone practice. Employment law is one of our five departments. Over 150 of our over 1,000 attorneys around the world are in our employment law department. Our practice has not historically been affected by financial ups and downs (our clients get sued in major employment litigation in good times and bad) and the latest financial crisis is no exception. We are slightly larger now than we were just before the financial crisis.
Anders Etgen Reitz: The Magnusson employment practice is a stand-alone practice. The area has, as with the firm, experienced a strong growth during the past two years, with an increase in fee earners of more than 60 per cent.
Ignacio Funes de Rioja: Labour and employment law is our only practice area. With 50 attorneys in our Buenos Aires office and, additionally, correspondent offices throughout the country, we only advise employers on these matters. We are larger than we were before the crisis, but we try to have moderate growth in order to maintain a very consolidated and highly qualified team.
The importance of the matters we handle has been significantly increasing due to the high levels of conflict and the higher level of complexity concerning the laws and social context.