Trade in Services Agreement (TISA) - MODE 4: Movement of Natural Persons

Transcription

1 Trade in Services Agreement (TISA) - MODE 4: Movement of Natural Persons Notes on Trade in Services Agreement (TiSA) Annex on Movement of Natural Persons (April 8, 2015) July 1, 2015 Introduction This critique will discuss solely the issue of migrant workers and employees, but not the many other issues surrounding the Trade in Services Agreement (TISA) or the trade in services chapters in other free trade agreements, including the desirability of having this agreement in the first place. On top of the many serious issues surrounding it, TISA threatens to remove the host country labor rights protection that all workers, including migrant workers, should enjoy. Being an agreement that purports to regulate the provision of services across borders, TISA should only regulate bona fide independent service suppliers, not migrant workers, who should instead be protected by the domestic labor and employment laws of the host country where they work. Having the status of a worker/employee guarantees that she/he is also covered by ILO Conventions. The contractual, commercial and economic reality is that the typical migrant is under the supervision and control of the person to whom services are rendered, on a long-term or even potentially permanent basis. Under many jurisdictions such control or supervisions are clear indications of the existence of an employer-employee relationship. As an employee, the migrant worker, unlike an independent service supplier in TISA, does not get to choose the manner and means by which the work is done. Moreover, there is no parity in bargaining power between a worker or employee (local or migrant) and the employer, the latter being way more powerful than the former. Thus, the state (host country) must come in to protect the rights of all employees that work in its territory. In contrast, the bona fide independent service supplier (local or foreign) is at par with the client. Faced with an offer to do a certain task under terms and conditions which she deems unfavorable, she could simply reject the offer and find other clients. Local labor and employment laws should apply to both migrant employees and local employees, in the same manner that default contract laws apply to both local and foreign service suppliers.

2 However, the host country should maintain its prerogative to pass and implement immigration and national security laws, and apply them to both migrant workers and foreign service suppliers. At the same time, the home country of the migrant may continue to have laws that protect migrants from recruiters and their purported employers in the home country. The movement of natural persons under the GATS, TISA, and other free trade agreements The Mode 4 provisions under the General Agreement on Trade in Services (GATS) 1, under the services chapters of free trade agreements 2, including the proposed Trade in Services Agreement (TISA) 3, typically involve the movement of natural persons such as investors, intra-corporate transferees (managers, specialists, technical persons) and highly technical personnel such as those with expertise law, accounting, taxation, management consulting, engineering, computer, advertising, research and development services, translation services, higher education, architecture, and research and development, and the like. One easily infers from the above enumeration that either these natural persons are trying to look for investment opportunities, or are providing highly-specialized, time-bound services. In neither case is any of them considered an employee. Hence, those deployed under Mode 4 who provide services by way of a contract for service do not expect any protection under the labor laws of the host country, and their contracts are instead governed by default contract laws. It is clear then that the Mode 4 provisions in trade agreements should not be written or interpreted in a way that makes it applicable to the situation of migrant workers. 1 Please see the European community and its Member States Schedule of Specific Commitments under the GATS, Supplement 2. 2 Please see the Japan Switzerland Free Trade Agreement, the ASEAN Australia/New Zealand FTA, and the EUROPEAN FREE TRADE ASSOCIATION (EFTA) - Singapore FTA (ESFTA) 3 EU Initial Offer Nov TRADE IN SERVICES AGREEMENT, EUROPEAN UNION SCHEDULE OF SPECIFIC COMMITMENTS & LIST OF MFN EXEMPTIONS.

3 Mode 4 would remove labor law protection to migrants TISA or other trade and investment agreements should not place migrant workers under Mode 4 because that would make them independent service suppliers or independent contractors supposedly working for their own account, and thus not considered as employees. Such erroneous characterization of the jobs that migrants typically render does not reflect the economic reality or the business reality of the relationship between the migrant and the employer. It would also take them out of the coverage and protection of labor laws of the host country. Host country labor and employment laws trump TISA. No international agreement should be permitted to remove the responsibility of a country to protect employees and workers working in its jurisdiction. Regardless of any international agreement, the labor and employment laws of all countries should apply to all employees and workers, both domestic and foreign. Among the many serious issues in TISA is that it reclassifies many, if not all, migrant workers as independent service suppliers. The TISA text (April 2015) provides: Article 1 1. xxx 2. The Agreement shall not apply to measures affecting natural persons seeking access to the employment market of a Party, nor shall it apply to measures regarding citizenship, residence or employment on a permanent basis. The proposal was cynically drafted in order to apply not only to highlytechnical, typically highly-paid short-term engagements of professionals such as architects, engineers, accountants, designers, IT consultants but also to migrant workers. In the case of the latter, that would mean that migrants would be placed in a ridiculous position where suddenly they will not be considered as employees but mere service suppliers, or better yet, independent service suppliers, there purportedly being no employeremployee relationship between the migrant and the employer for whom she/he renders service. In fact, it is possible that even highly-skilled professionals typically included in Mode 4, could be prejudiced if and when, for a number of reasons discussed below, they should be also considered as employees under the

4 jurisdicion of the host country. Instead of recognizing the employeremployee relationship, they will be treated as independent service suppliers working on their account. In order to protect both the typical migrant workers (who by the way could be highly skilled as well, especially in the health profession, albeit typically low-paid) and traditionally considered as highly-skilled professionals (accountants, IT professionals, architects, engineers), the above Paragraph 2 which reads: 2. The Agreement shall not apply to measures affecting natural persons seeking access to the employment market of a Party, nor shall it apply to measures regarding citizenship, residence or employment on a permanent basis. should be enhanced by adding the following: Provided that, regardless of the industry or sector where the services are being rendered or the specific commitments of the parties in the agreement, the character of the contractual relationship, the existence or absence of employer-employee relationship, the identification of the real employer, if any, the type of employment relationship, the classification of the employee, and the duties and responsibilities of all the parties concerned, shall be governed by the contract, employment and labor laws of the host country where the services are being performed. This means that: 1. Bona fide Mode 4 persons (typically highly-paid): Under the jurisdiction of the host country, the bona fide Mode 4 professional providing services will correctly not be treated as an employee of the firm for which she or he renders service (either personally, or as representative of their employer/service provider 4 ) to the client. For example, a tax consultant from the U.S. is flown into Ireland to assist in assessing the U.S. tax implications of the U.S. sales of an Irish brewing company. 4 Article 1. [CA/EU/IS/NO propose: Scope] [CH/TR propose: Scope and General Provisions] 1. This Annex applies to measures affecting natural persons who are service suppliers of a Party, and natural persons of a Party who are employed by a service supplier of a Party, in respect of the supply of a service], [CA/CR/EU/NO/PA propose; AU/JP/TR oppose:as set out in each Party s schedule of specific commitments].

5 The same firm may want to hire Korean engineers to study, for a period of one month, the need to upgrade the machineries used in making beer. In these cases, the Irish firm is the client, not the employer of neither the account nor the engineers. In fact, this is the actual economic and commercial reality even if these service suppliers were also Irish. Typically, the engagement is for a determined or determinable period of time and not on a permanent basis. However, if the Irish firm asks the accountant to work for it for as long as the position of tax accountant for U.S. sales exists, then it could be argued that the accountant is no longer a bona fide Mode 4 person, but an employee of the Irish firm, the latter being not a mere client, but an employer on a permanent basis. Again, this should be the case even if the accountant was Irish. 2. Migrant workers: (typically not highly-paid) The typical migrant workers, including those working in the medical field (nurses, laboratory personnel, caregivers, licensed practial nurses, etc.), should obviously be treated as employees in the places abroad where they render service. The employer has the right of control not only over the ends to be achieved, but also over the means and manner by which the work is done by the migrant worker. Thus, the proposed provisions in the February 2015 text, which were deleted from the April 2015 text, are quite problematic since they lump the typical migrant workers (Nos. 6, 7, and 8) with the rest of the typical bona fide service providers: Article 4. Xxx 3. Subject to any terms, limitations, conditions and qualifications that the Party sets out in its Schedule, Parties shall allow entry and temporary stay of [contractual service suppliers and independent professionals 3] for a minimum of [X%] of the following sectors/subsectors: Professional services: 1. Accounting, auditing and bookkeeping services (CPC 862) 2. Architectural services (CPC 8671) 3. Engineering services (CPC 8672) 4. Integrated engineering services (CPC 8673) 5. Urban planning and landscape architectural services (CPC 8674)

6 6. Medical & dental services (CPC 9312) 7. Veterinary services (CPC 932) 8. Services provided by midwives, nurses, physiotherapists and paramedical personnel (CPC 93191) While the April 8, 2015 text no longer has such enumeration, there is nothing in said text which prevents a party s specific commitment that would include Nos. 6, 7, and 8 as well as other kinds of work typically done by migrant workers including clerical, payroll, janitorial, domestic help, construction, etc. In fact, the following provisions in Article 5 of the April 8, 2015 text allows a lot of room for a party to include typical migrant work, by simply enumerating them in the specific commitments under the guise that they are contractual service suppliers or independent professionals : Thus, a party may very well include all of the February 2015 enumeration above, and add even more types of engagements typically done by migrant workers. This would give rise to an absurd situation where migrants working as nurses, healthcare workers, laboratory technicians, phlebotomists, radiology technicians, etc. would now, because of a trade agreement, be considered as mere service suppliers independently working on their own account, and not employees of the hospitals or clinics where they render service. Worse, instead of being service suppliers, they may be considered not as employees of the person for whom they render service, but employees of a third party, i.e. a manpower agency located in the home country of the migrant. In order to totally take the worker out of the labor laws of the host country, the manpower agency will be considered the real service supplier. It will then deploy its employee, i.e. the migrant, to work in the premises of the real employer in the host country. This manpower agency becomes an unnecessary third party that is inserted between the migrant and the real employer, thus giving birth to a triangular

7 contract obviously for no reason other than to shield unjustly the real employers (hospitals, clinics, etc.) from any of the responsibilities and risks of being an employer. There are reasons why there is typically no employer-employee relationship between the bona fide Mode 4 person in Nos. 1 to 5 above: the engagement is short term, solely for a definite or determinable time frame, and the tasks assigned is not integral to the business of the client. The accountant is flown in to take a look at the tax structure of a car manufacturer; an architect from another country works on the design of the building complex of the same car manufacturer. Neither the tax accountant nor the architect is permanently needed to manufacture cars. Thus, these two professionals are treated by laws of many jurisdictions as independent contractors. In contrast, the services of a nurse who works at a hospital is directly related, indispensable, and perpetual. Thus, he or she must be treated as an employee. The same thing is true of a worker, regardless of skill level, working in the assembly line of a car manufacturer. Moreover, in a bona fide Mode 4 engagement, the client has no control over the means and manner by which the job is done. The client is only interested in the final result. The car manufacturer cannot dictate to either the tax accountant nor to the architect how to do their job. In stark contrast, an employer has the right to control the means and manner by which the work is done. The same car manufacturer will certainly control the means and manner by which its assembly line employees do the work: what time they will work, what uniform they will wear, who will supervise them, what tools they will use, etc. No one will seriously argue that the nurses and healthcare workers could be allowed by any hospital to do their jobs through the means and manner they deem fit. Mode 4 provisions do not apply to measures relating to employment. Mode 4 provisions in FTA s and in GATS clearly state that these do not apply to measures affecting employment, nor to access to the employment market. The Annex on Movement of Natural Persons Supplying Services Under the Agreement to GATS provides that [t]he Agreement shall not apply to measures affecting natural persons seeking access to the employment market of a Member, nor shall it apply to measures regarding citizenship, residence or employment on a permanent basis. Similar language is included in the ASEAN-Australia-New Zealand FTA, the Switzerland-Japan FTA, the Japan-Philippines Economic Partnership Agreement (JPEPA), and the EU-Colombia-Peru FTA.

8 There is a reason why the Mode 4 specific commitments in various agreements typically include only persons whose purpose of travel is not for employment and why the language in all Mode 4 sections in FTAs and in GATS specifically provide that the same does cover measures related to employment or access to the employment market: Mode 4 is meant solely for temporary movement of natural persons who will explore business opportunities or who will provide services to clients, which in turn will not supervise nor even have the power of control over the person who will provide services. Such supervision and control indicate clearly the existence of employeremployee relationship. It is not a coincidence then that in many jurisdictions, such absence of control and supervision on the part of the person for whom services is rendered indicates clearly that there is no employer- employee relationship. Conversely, supervision and control indicate that an employer-employee relationship exists. A quick look at norms to determine employer-employee relationships in a few jurisdictions - Thailand, New Zealand 5, the U.S. 6, the UK, and the Philippines 7 shows that one of the most important factors in determining the existence of employer-employee relationship is the existence of the right to employer to control not only the final outcome of the job, but also the means and manner of doing the job. Simply put, there is employer-employee relationship if the employer has the right to control the manner and means by which the work is done. Also, provision of services, done on a full-time basis, over a long or indeterminable period of time would indicate the existence of an employer-employee relationship. The services provided by migrant workers such as factory workers, domestic helpers, office clerks, store clerks, etc. all have these characteristics of an engagement where there is an employer-employee relationship. 5 JAMES BRYSON v. THREE FOOT SIX LIMITED (IN THE SUPREME COURT OF NEW ZEALAND - SC CIV 24/2004 [2005] NZSC 34). 6 U.S. Department of Labor - Wage and Hour Division - Fact Sheet #13: Am I an Employee? Employment Relationship Under the Fair Labor Standards Act (FLSA). (Revised May 2014) 7 LEGEND HOTEL v. HERNANI S. REALUYO; G.R. No ; July 18, 2012 (Philippine Supreme Court)

9 Incidentally, the Labour Standards Law of Japan [Law No. 49 of 7 April 1947 as amended through Law No. 107 of 9 June 1995] is quite noteworthy as it provides for equal protection for all workers: Equal Treatment Article 3. An employer shall not engage in discriminatory treatment with respect to wages, working hours or other working conditions by reason of the nationality, creed or social status of any worker. Principle of Equal Wages for Men and Women Article 4. An employer shall not engage in discriminatory treatment of a woman as compared with a man with respect to wages by reason of the worker being a woman. However, these provisions will apply only if the migrant is considered an employee, and will not if the migrant is treated as a service provider under Mode 4. Not being considered employees, migrants deployed under Mode 4 would also not be able to join labor unions, thus depriving them of workers rights under various ILO conventions. Clearly then, such provisions do not, or should not apply to migrant workers. Typical Mode 4 persons, due to the nature of their sojourn in the foreign country, are not covered by labor laws of the host countries since they are not even considered as employees. On the other hand, migrants are, or should be, governed by labor laws of the host country since the nature and duration of their work would definitively show that their status is that of employees. There is clearly an employer-employee relationship since they are subject to supervision and control by the person for whom they render service. Attempts to include migrant workers, including unskilled workers, under Mode 4 would jeopardize their status as employees, thus running the risk of not enjoying the protection of labor laws in the host country. From the vantage point of both labor law and international trade law, it is apparent that Mode 4 typically contemplates a valid contract for service 8 between a person (natural or juridical) domiciled in one party to the trade agreement that provides service to an entity located within the other party to the agreement. There is no employer-employee relationship between the natural person (whether deployed by a juridical person or working for her/his own account) and the client, or the person who obtains the services, because the person providing the service has all but complete discretion on how to 8 Not to be confused with the contract of service which, under the labour law of New Zealand, is an employment contract.

10 render the service or how the work is actually done - free from the control or supervision of the client. Also, the services provided are typically of a short and/or pre-determined duration, or at least determinable at the time of the engagement. Moreover, the types of services are invariably highly technical and specialized, thus requiring from the natural person a highly specialized professional and educational background 9. Hence, Mode 4 does not apply to the situation of migrant workers, since they render service more or less of a permanent nature and under the framework of an employer-employee relationship. A clear indication of this relationship is the fact that the employer supervises the migrant and directs not only the nature, timeliness and quality of the final product, but also the way the work is actually done. Thus, as mentioned earlier, Mode 4 provisions in FTAs and in GATS specifically provide that nothing in the said chapter on movement of natural persons shall apply to measures regarding employment or access to the employment market. Just like those mentioned earlier, the Switzerland-Japan FTA thus provides on Art. 50 Movement of Natural Persons (par. 2) that: [t]his Chapter shall not apply to measures affecting natural persons seeking access to the employment market of a Party, nor shall it apply to measures regarding nationality or citizenship, residence or employment on a permanent basis. A similar provision is included in Art. 108 Movement of Natural Persons of the Japan-Philippines Economic Partnership Agreement (JPEPA): 2. This Chapter shall not apply to measures regarding nationality or citizenship, or residence or employment on a permanent basis. Also, apparently consistent with the same principle, the JPEPA starts off its list as follows: Article 110 Specific Commitments 1. Each Party shall set out in Annex 8 the specific commitments it undertakes for: (a) short-term business visitors of the other Party; (b) intra-corporate transferees of the other Party; (c) investors of the other Party; (d) natural persons of the other Party who engage in professional services; 9 However, there are also instances when highly- skilled professionals could also be treated as employees when they work for an indeterminate period of time and under the control and supervision of the person to services are rendered. An example would be doctors, nurses and other medical practitioners working permanently in hospitals and nursing homes.

11 (e) natural persons of the other Party who engage in supplying services, which require technology or knowledge at an advanced level or which require specialized skills belonging to particular fields of industry, on the basis of a contract with public or private organizations in the former Party; and Curiously, however, the above provision end up adding what seems an anomaly. Among the natural persons enumerated in JPEPA are those who, by the nature of their work, are invariably considered as employees of the hospitals, hospices and other health-care institutions where they work: (f) natural persons of the other Party who engage in supplying services as nurses or certified careworkers or related activities, on the basis of a contract with public or private organizations in the former Party or on the basis of admission to public or private training facilities in the former Party. Fortunately, the Philippines and Japan had since entered into a Memorandum of Understanding which explicitly states that nurses, certified careworkers and those engaged in related activities deployed under JPEPA shall be considered as employees. If the text of JPEPA were to be followed strictly, these nurses will not even be considered as employees, but will instead be relegated to service suppliers under Mode 4. In sum, labor laws of host countries, and not TISA, should govern the status of migrant workers. While each country has the right to pass and enforce its immigration laws in relation to its labor laws, it should always be the case that: 1. the existence of employer-employee, including with respect to migrants, should be determined under the labor laws of the host country where they work, and not by any trade or investment agreement; and 2. should a migrant be considered an employee under the laws of the host country, all of the pertinent labor and employment laws of that host country should apply to her/him. ### Tony Salvador Initiatives for Dialogue and Empowerment Through Alternative Legal Services (IDEALS)