What are International Labour Law and Standards, and How Do They Affect Companies Doing Business Abroad?

For over a hundred years, a tripartite organisation of trade unions, governments and business leaders – the UN’s International Labour Organisation (ILO) – has been working to promote job security and quality of employment for workers around the world. It does so with a set of international labour laws and recommended standards, which its member countries can choose to implement.

As an HR executive or business owner looking to expand operations internationally, the nuances of how the ILO’s various Conventions and Recommendations affect your business will become a crucial aspect of your company’s compliance policy. In this article, Mauve Group walks you through its comprehensive guide to international labour laws, how they effect regional and local laws in different countries, and best practices to ensure company-wide compliance with all relevant legislation.

What is international labour law?

The ILO was founded in 1919 in the aftermath of World War One, and to date has 187 member countries out of a possible 195. The role of the ILO is to work with the three bodies primarily concerned with labour – employees, employers, and government – to create internationally-recognised standards aimed at achieving social justice through the eradication of “injustice, hardship and privation” in the workplace.

‘International labour law’ refers to the body of rules which the ILO has created, governing the rights of employees and duties of employers across public and private international law. These rules come with differing degrees of obligation for member countries, meaning that by the time they are distilled down to the level of local law they may look quite different from country to country.

Multinational enterprises and business expanding overseas need to know which international labour laws apply, as well as how they apply, in the countries they operate in. We’ll now take a look at the laws established by the ILO, and the degree to which each may be adopted by member countries.

ILO Fundamental Conventions, or the ‘Declaration on Fundamental Principles and Rights at Work’

In 1998, at that year’s ILO International Labour Conference, a declaration was made regarding which workers rights were ‘fundamental’, and thus universally applicable. The ‘Declaration on Fundamental Principles and Rights at Work’ established the following as being the inalienable rights of all people in work:

• Right to association and collective bargaining (in effect, trade unionism)
• Prohibition of all forced and compulsory labour
• Prohibition of all child labour (before the end of compulsory schooling)
• Prohibition of discrimination with regards to employment and occupation

At that 1998 conference, the ILO agreed that all 187 nation members should be obligated to comply with these rights, and commit them to local law, regardless of whether or not they had ratified the associated Conventions (29, 87, 98, 100, 105, 111, 138 and 182).

As such, these are laws to which any business operating in an ILO member country must also adhere to. However, as we’ll soon discuss, the shape compliance takes changes depending on how different countries have chosen to implement the Declaration’s Conventions.

ILO Priority Conventions

Beyond the fundamental rights of the ILO’s 1998 ‘Declaration’, there are no other international labour laws or standards with which member countries are obligated to comply.

Instead, member countries can choose whether or not to ratify a specific Convention. If they do, they commit themselves to writing the Convention’s standards into their own national laws. If they do not, they are not obligated to change or update their existing laws, but may choose to do so regardless.

Having said that, there are four specific ILO Conventions which are granted ‘priority’ status. These, above all, the ILO recommends all member states ratify and implement.

• Labour Inspection Convention (1947)
• Labour Inspection (Agriculture) Convention (1969)
• Triparte Consultation (International Labour Standards) Convention (1976)
• Employment Policy Convention (1964)

ILO Secondary Conventions

Ratification of any Conventions falling outside the ‘Declaration’, or which are not given ‘priority’ status, is left entirely to the discretion of individual member nations.

Sometimes a nation’s government may choose not to ratify a specific Convention for political reasons, but may effectively implement it all the same. For example, the UK refused to ratify the very first ILO Convention in 1919, which established a maximum 48-hour working week, and yet local UK labour law has nevertheless enshrined these same hours.

If a nation chooses to ratify an ILO Convention, however, then it is bound by international law to write the Convention into its own labour laws. There are two important aspects of this process to be aware of:

1. A nation can choose to ratify a Convention early, and then work toward full compliance, or to create the legal framework for compliance before ratifying.
2. There is a certain degree of legal flexibility to the standards outlined by each Convention, meaning that ratified states can implement Convention laws in different ways.
   1. This is perhaps the most crucial factor to be aware of as a global business: even if several of the countries you operate in have ratified the same Convention, their local labour laws concerning it may still differ considerably.

What are international labour standards?

ILO Recommendations

Below ILO Conventions on the totem pole are what’s called ‘ILO Recommendations’, or international labour standards. These are a series of non-binding recommendations which governments, employers, and trade unions can choose to heed, in order to improve the working conditions of employees.

ILO Recommendations have no legal backing, per se, but may inform the labour laws introduced by policy makers and governments in different countries, and thus may still directly affect global compliance in your company.

What is regional labour law?

Regional labour law is the body of legislation, informed by international law, which applies across a group of countries. The European Union (EU), North American Agreement on Labor Cooperation (NAALC), and the Congress of South African Trade Unions (COSATU) are all examples of ‘regions’ or regional agreements with their own multilateral labour laws.

Similarly to how the ILO’s Conventions and Recommendations inform labour laws in member countries, yet do not strictly dictate them, regional labour laws apply across multiple countries, but allow those countries to take different routes to meet them.

If a German company was employing workers in Mexico, for example, it would have to comply with labour laws and standards outlined in the NAALC, including:

• The right to strike
• Minimum wages and conditions of employment
• “Equal pay for equal work” (prohibiting gender discrimination)
• Health and safety regulations
• Protections for migrant workers

The specific laws regulating each standard in this example, however, may still differ between Mexico and the USA – i.e. the final word is almost always with local authorities.

What is local labour law?

Every country in the world has its own unique laws concerning employment, known as ‘local labour laws’. In a trickle-down effect, each nation may be answerable to regional labour laws, and above them to international labour laws created by the ILO – depending on which of those they’ve chosen to ratify or implement.

And yet, at the same time, each country has a certain degree of flexibility with regards to how they comply with regional and international labour laws and standards. For example, though both France and Australia have ratified Convention 131 (Minimum Wage Fixing Convention, 1970) of the ILO, they are permitted to establish different national minimum wages: €11.27 in France and $21.38 ASD in Australia, or £10.09 and £12.28 GBP respectively. Interestingly, in another example, though France and Latvia are both signatories of Convention 131 and EU member states, their national minimum wages differ hugely: €11.27 and €3.63, respectively.

What this goes to show is that although several countries may be bound by the same international labour law, the application of that law by their national legislature can be very different.

If we’re to continue with the above example, what then does this mean for a multinational operating in Australia, France, and Latvia simultaneously? Let’s find out.

Best practices for global business expansion: obligations and recommendations

The bottom line of labour law compliance is that you must comply with local labour laws first and foremost.

Local laws should effectively be a reflection of a country’s position in regard to the 1998 ILO Declaration, ILO Priority and Secondary Conventions, and ILO Recommendations. Thus, adhering to those laws should also ensure a business’s compliance both with the relevant regional, and international labour standards.

You may, as an MNE, elect to create company-wide labour standards inspired by the ILO. Because the ILO’s Conventions and Recommendations represent the best possible standards globally, doing so would hopefully render you compliant with most countries’ local labour laws. It is nevertheless important to remain aware of these local laws, to ensure your company policy does indeed comply.

Here’s a brief look at the core aspects of work which local labour laws regulate, the specifics of which often vary from country to country:

• Contracts: regarding which elements must be included in written employee contracts
• Payroll: regarding who is responsible for withholding employee tax contributions, and how payment should be made to independent contractors, versus overseas employees
• Wage: regarding national minimum wages, 13^th month salaries, and more
• Termination: regarding the employee dismissal process, lengths of notice, and correct procedure
• Benefits: regarding employer contributions to national healthcare insurance, workers’ compensation, pension plans and unemployment benefits
• Discrimination: regarding ‘fair’ and ‘unfair’ discrimination in the workplace and in recruitment

Awareness of local labour laws affecting these core areas is a bare minimum for companies concerned with global compliance. In reality, an experienced and highly-competent team of labour law and tax experts should be relied upon in order to ensure full compliance with the laws of the overseas countries you operate in.

What follows are a few additional pieces of advice regarding exceptions to local labour law’s ultimate authority.

International labour law may apply where local labour law lacks

Sometimes when a country’s local labour laws are unclear, or are deemed to have insufficiently met the ILO Conventions ratified by that country, a court of law may look to the ILO for clarity.

As such, whilst it’s necessary to fully comply with the local labour laws of the countries you operate in, it is equally important to be aware of international labour standards. Implementing the latter throughout your business will go a long way to ensuring you are not held accountable for the shortfalls of another country’s labour laws.

International binding trade agreements and treaties

When a private enterprise strikes a trade deal with an overseas country, or operates in another country under an international treaty, it’s possible that they may be answerable to the labour laws included in said treaty, over and above the country’s local laws.

“Close connection” and rare cases of dual labour law application

Depending on regional and local labour laws, there is sometimes grounds for an employee working overseas to claim the protection of their home country’s labour laws.

For example, in the UK labour law case Ravat v Halliburton Manufacturing and Services Ltd, the UK national Mr Ravat was being employed in Libya by a German subsidiary of the American multinational, Halliburton. Mr Ravat was dismissed by a supervisor whilst working in Libya in a manner which would be deemed ‘unfair dismissal’ under UK law, but not under Libyan local law. Typically, Mr Ravat would not have had a case. However, his employers had initially told him that he would be employed according to UK labour standards, and since this proved he had a “close connection” to the UK, the UK Supreme Court ruled that he was indeed covered by UK labour laws, and thus was entitled to ‘unfair dismissal’.

Whilst this case may seem unlikely to recur, it offers an important lesson: international labour standards are far-reaching, and it is therefore crucial that employers are well-informed about which labour laws apply to each of their employees, and communicate this to their workforce clearly.

Conclusion: A final word on international labour law compliance

If you are considering expanding overseas, or are already an established multinational, you must comply with the local labour laws of each country you employee workers in. With few exceptions, these labour laws will also ensure your adherence to regional and international labour laws, as they will have been informed or shaped by them.

International labour laws are established and enforced by the ILO in order to protect the fundamental rights of workers, with the goal of establishing lasting peace, progressing international development, and mitigating the potentially adverse effects of international market competition.

As Mr. Salazar-Xirinachs, Executive Director of the ILO’s Employment Sector put it: “Doing good and doing well are mutually reinforcing.” In short, to be sustainable, enterprises must be socially competitive.

For help navigating the complexities of international labour laws, global payroll, and managing an overseas team remotely, contact expert global business solutions provider Mauve Group, today.