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Firing an employee is a tough decision, but sometimes it needs to be done. And sometimes it needs to be done immediately, or it risks becoming much more complicated and costly.

Say you discover an employee is stealing from the company. Do you fire him right away, or give him another chance? You can terminate him immediately for “serious misconduct”, but this needs to be done within one week of learning of the theft. Wait too long and he’ll be owed all sorts of compensation for wrongful termination.

Seems harsh? Wouldn’t it be better to give him another chance to see if he improves? Well, the idea is that if you keep an employee you know has been engaging in serious misconduct around for too long after knowing of the problem, it can’t be all that serious of a problem. It also prevents the employer from digging up some minor offense from a long time ago and claiming it’s “serious misconduct.”

Knowing what the law requires and having procedures in place BEFOREHAND is the best way to avoid the clock expiring. By the time you’ve consulted with headquarters and gotten a legal opinion, it’s probably already too late.

Again, it’s a tough decision – you often want to give the employee the benefit of the doubt or see if he’ll change his ways. But when it needs to be done, the law really pushes employers to pull the trigger right away.

The Ministry of Commerce just announced the registration of the first two Geographical Indications (GI) for Cambodia. A GI is like a trademark for goods – typically food products – originating in a certain region. Producers within the region, who abide by the governing organizations’ rules, can use the GI designation on their products.

So what’s the point? A GI is all about differentiating your product from the run-of-the-mill commodities of your competitors, which hopefully will let you charge a higher price. If a regional group of producers can point to something distinctive about their product – perhaps the soil gives it a particular flavor, or there’s a traditional production technique – then it might form the basis for a successful GI campaign.

In order to join the WTO, Cambodia had to agree to update its intellectual property laws – including passing a GI law. The Ministry of Commerce issued an interim regulation early last year allowing for the registration of GIs, while a full GI Law is currently being drafted. Today, the first two GI applications were granted, for Kampong Speu palm sugar and Kampot pepper. I don’t know much about the palm sugar, but Kampot pepper is a real treat – the fresh green clumps of peppercorns make a fantastic seafood sauce. Before the civil war disrupted production, Kampot pepper was quite reknowned in the French culinary world.

Hopefully with the GI and a bit of marketing, the producers down in Kampot can regain some of that cachet.

It can be extremely frustrating to see your star employee, who you’ve nurtured and developed over the years, leave to work for your bitter competitor down the road. They take with them your trade secrets, client contacts, and business plans, while leaving your firm with a gaping hole in operations. Employers often try to prevent departing employees from working for the competition through “non-compete” clauses in the employment contract.

Preventing such departures is a major concern for many businesses, but at the same time runs contrary to the free mobility of labor. Whether such clauses are enforceable depends on the jurisdiction you’re in.

In Cambodia, the tension between the two is resolved decidedly in favor of the employee, Article 70 of the Labor Law:

“any clause of a contract that prohibits the worker from engaging in any activity after the expiration of the contract is null and void.”

That’s a very strong rule in favor of the employee. As Cambodia does not have a law on trade secrets, it’s really important to include a non-disclosure agreement in the initial employment contract, and remind the departing employee of it during their exit interview. Otherwise, there’s not a whole lot you can do to prevent them from using all that valuable information to the benefit of your competitor.

If your employee left before the end of their contract, you can sue him for damages. The law gives the judge wide discretion in setting the damages, which can be difficult for the employer to quantify.

There is a small consolation in that if you can prove that the new employer encouraged your employee to break their contract and move jobs (aka poaching or solicitation), then the worker and new employer are jointly liable for your damages. This can be tough to prove, and the employee will still likely be able to work for your competitor.

The take-home lesson is to include an NDA, and make sure your employee and her new employer know you’re serious about enforcing it.

Cambodia is a huge destination for international volunteers, but the receiving NGO or organization needs to be aware of certain provisions of the Labor Law which could apply. Though they’re called “volunteers”, many are in fact given money in exchange for their work. Whether you call it a stipend, per diem, or beer money, it’s money for work – also known as a “job”.

It doesn’t matter that the sum won’t cover much more than their tuk-tuk rides, it’s still likely several times the average income of a Cambodian, and considered remuneration by law. This means they’ll likely be defined as workers under the Labor Law, with all the protections and benefits that go with it: annual leave, severance pay, termination safeguards, etc. This is not necessarily a bad thing, and if considered ahead of time can be managed through proper HR policies. It shouldn’t be a reason not to welcome on volunteers, but NGOs need to be aware of what they’re taking on.

Say you’re hit by a car, or a bathtub falls on you through the ceiling of your hotel. Is the driver or hotel owner at fault? What sort of compensation are you owed? The answers are a matter of tort law – “tort” being the French word for wrong.

So does Cambodia have a tort law? Good question, you’d be excused for answering no.

The correct answer is yes, but it’s not entitled “Tort Law”. The provisions are hidden away at the end of the Law on Contract and Other Liabilities, passed way back in 1988. The fourteen articles on “Other Liabilities” are fairly straightforward and barebones. The two main provisions are as follows:

Article 121:
Any person who causes damages to others by reason of his own fault, shall be liable in
compensation for such damage. Even where the damage is caused by involuntary acts such as
carelessness or negligence, the offender shall be liable.

Article 128:
Property owners shall be liable for damage caused to others if such damage is due to the owner
negligently failing to properly maintain, control or repair the property.

Those are the basic rules, and there isn’t much further guidance on the matter. All of this will be replaced when the Civil Code comes into place, hopefully sometime this year. So next time you’re hit by a car or crushed by a bathtub, remember the Contract Law and Other Liabilities…and hope the other guy is insured.

Yesterday’s Cambodia Daily (print edition only) reported on a police raid that seized 700 bottles of fake Johnnie Walker whiskey. Refilling and distributing counterfeit alcohol is not only a violation of trademark law, but also highly dangerous to public health. Bootleg bottlers have been known to add all sorts of nasty things to their concoctions to boost the alcohol content. According to the article, the legitimate Johnnie Walker distributor will be launching an advertisement campaign to teach drinkers how to tell the difference between the real stuff and imitations.

This is exactly the right strategy. Counterfeit goods are a major problem for too many companies, as they undermine consumer confidence in their product and erode profits. Johnnie Walker is going after both the supply and demand sides of the problem. Coordinated police raids, blocking of imports, and court cases can disrupt the supply chain, hopefully persuading the infringers to move on to a more legitimate line of work. But an effective anti-counterfeit strategy needs also to deal with consumer demand. If consumers can’t tell the difference between fakes and the real thing, or worse, don’t care which they buy, then no amount supply disruption will solve the problem. This is a long-term process – a single raid won’t shut down the counterfeiters for good, and consumer preferences don’t change overnight. It requires a sustained investment in monitoring, advertising, and legal action.

Though counterfeits of many goods are widely available in Cambodia, in my opinion this is due in part to lack of effort on the part of trademark owners. The legislation is in place and the authorities have been established. These laws are not self-enforcing though – it’s up to the trademark owners to figure out who is ripping off their products and complain to the relevant authorities. Though enforcement might not be perfect the first time, Johnnie Walker is showing that effective action is possible.

Update: The bill passed the Senate on March 19, and goes to the King for signature before becoming law.

The Anti-Corruption Law is the hot topic of debate these days, as anyone who has opened a newspaper knows. After various drafts over the past 15 years, last Friday the National Assembly passed the bill, some say with too little debate. The draft now goes to the Senate for debate, and then to the King to sign before becoming law. The draft is available here in Khmer and English. This law doesn’t actually define or prohibit corruption – that was done in the new Criminal Code, passed late last year, but not fully implemented until November 2010.

What it does is set up two anti-corruption agencies – the National Council Against Corruption and the Anti-Corruption Unit appointed by the Prime Minister. Why two? Well, the law spells out different functions for each – the Council is more of an oversight body, and the Unit implements and investigates cases. But the list of their respective duties seems to overlap to a fair degree, so it remains to be seen how it plays out in practice. Two enforcement agencies is not necessarily a bad thing, inter-agency competition works well in antitrust enforcement in the US, and conceivably one body can keep the other in check.

Cambodia has been criticized for corruption, and hopefully this law will mark a turning point.

Yesterday I attended a conference on the Foreign Corrupt Practices Act, put on by the American Chamber of Commerce. If you engage in business in Cambodia and you’re not already familiar with the FCPA, you really should be. The law bans any corrupt payment to a foreign government official to obtain or retain business.

Though it’s an American law, it applies anywhere in the world to a shockingly broad range of companies and individuals. Of course US citizens and companies are subject to the law, but also any company listed on a US stock exchange. One lesson from yesterday was that if the corrupt payment is made in US dollars, even through a foreign bank, it likely was cleared through a US bank and therefore would be subject to the law.

If somehow you’re not subject to the FCPA, there are equivalent extra-territorial laws in many other countries, not to mention the recent Cambodian Anti-Corruption Law. The take-home message was that a foreign company or individual is most likely subject to such laws, and even if you’re not – bribery is a terrible risk to your business reputation.

A recurring issue at the conference was the question of facilitation payments. There seems to be an exception to the FCPA which allows for payments to facilitate or expedite performance of “routine governmental action”. This is a recognition that in certain countries such payments are standard practice, and if you do not pay them, absolutely nothing will get done. The line between acceptable facilitation payments and illegal bribes is a fine one, and you’ll often hear outright bribes described as “facilitation fees”. Don’t be tricked by funny language – if it smells rotten, it probably is. In general, a facilitation fee should be a relatively small amount, which almost everyone else is paying, and the government official who receives it should not have too much discretion over your matter. Also the payment cannot be giving you an advantage over your competitors. Obtaining government papers, routine licenses, phone service, and police protection are a few examples. But again, there’s a lot of gray area, and so it’s best to get an experienced lawyer’s advice if you’re unsure.

The conference was entitled “FCPA: Ignorance is No Excuse”, I would add that neither is “but-everyone-else-is-doing-it”. To date there have been no prosecutions in Cambodia, though there have been in Vietnam and Thailand. The Obama Department of Justice has made FCPA prosecutions a priority, with a number of high-profile investigations. It’s only a matter of time before an investigation hits Cambodia – don’t let it be you.

From now on you’ll see a little box up at the top of this page labelled ‘Legislation Tracker’. The idea is monitor legislation as it makes its way through the law-making process, or stalls and dies a silent death. The Post and Cambodia Daily do a good job of reporting on major pieces of legislation as they happen, but to my knowledge there’s no public database of proposed laws. If you have any more information or corrections, feel free to leave a comment.

Strong economic growth, low startup costs, and a wealth of untapped markets make Cambodia an attractive environment for starting up a business. Many foreigners arriving with no intention of becoming an entrepreneur, find themselves opening their first business in this exciting marketplace.
Whether you are an experienced entrepreneur coming here to start another venture, or are transitioning to self-employment for the first time, properly establish your company in full compliance with the law is crucial. While many businesses operate informally, many more have been shut down or encounter ongoing problems from the authorities. Spending the time and money to do everything properly is the only way to avoid potentially insurmountable hassles in the future.

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The work of a handful of attorneys at BNG Legal, this blog's mission is to keep the world up-to-date on legal issues in the Kingdom of Cambodia.

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