DELVACCA Presents:
The Top Ten Things U.S.
Employers Need to Know
About International
Employment and Labor Law
DELVACCA thanks Littler Mendelson, P.C. for sponsoring this event
presented by:
Eric A. Savage, Esq.
Littler Mendelson, P.C., Newark, NJ
973.848.4706, esavage@littler.com
Marguerite Walsh, Esq.
Littler Mendelson, P.C., Philadelphia, PA
267.402.3016, mwalsh@littler.com
Eric A. Tilles, Esq.
Arkema Inc., Philadelphia, PA
215.419.7317 eric.tilles@arkema.com
Today’s Agenda
1. The continued rapid pace of
globalization impacts employers
2. How the employment
relationship differs outside the
U.S.
3. Risks unique to the international
arena
4. Managing a globally-mobile
workforce
Companies Pushing
Globalization Forward
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Procter & Gamble – next 15 years will double annual sales
focusing on Africa, Asia & Latin America
Royal Philips Electronics – increasing their presence in
emerging markets, esp. healthcare business in China
PepsiCo – building 6 new plants in China; $1B over 4 years
Microsoft – increased presence in India
LG Electronics – 15% overall increase in sales in 2009 (India
– primary market)
Far Eastern International Bank –acquiring AIG international
credit card business
China Petroleum – acquired ADDIX Petroleums to give them
oil resources in Africa & Kurdish region of Iraq
Qualcomm & Zeebo joint venture – video-game console sold
all over the world, first hit market in Sao Paulo and Mexico
City, next other Latin American countries, then India
What Does Globalization
Mean for Employers?
 It boils down to.....
– Anticipating compliance
issues, especially regarding:
• Employment agreements
• Termination of employment
• Anti-corruption measures
• Data privacy
– Effectively managing
employee movement/
migration
• Expatriate assignments
• Unfair competition concerns
How Does the Employment
Relationship Differ Outside of the US?
To understand global differences in legal
aspects of the employment relationship, first
need to briefly consider the differences in
legal systems....
Comparative Legal Systems
 Three types of
legal systems:
– Common Law
– Civil Law
– Mixed Systems
Common Law Systems
 Laws made by judges
– England and most former/current
colonies
• US (except Louisiana)
• Canada (except Quebec)
• Singapore
• Hong Kong
• Ireland
• India
Civil Law
 Laws are codified and
judicial decisions have
little precedential value
– Continental Europe
– Mexico
– China
– Japan
Mixed Systems
 Elements of both common and civil law
– Israel
– South Africa
– Scotland
– Quebec
– California
Comparative Legal Systems
Wrap-up

This is boring – why should
I care about the differences
between legal systems?

Lines are blurring but the
substantive distinction isn’t

The bluffer’s guide to
international employment
law

Always keep cultural
differences in mind

Moving on to specific
differences in the
employment context...
Key Differences Between the US
and Other Jurisdictions
 Employment at will
– Generally unheard of outside the
US because employees have
employment contracts
 Wage and hour laws
– Very different outside of the US
– Generally covered by contract
– Vacations and public holidays
treated very differently
Key Differences (cont.)
 Leaves of absence
– Most jurisdictions
provide much more
generous pregnancy
leave and parental
leave
– Civil law jurisdictions
generally provide
much more sick
leave
Key Differences (cont.)
 Discrimination
– Varies widely
– May cover
categories not
recognized in the
US, e.g.,
philosophical beliefs
(recent case in UK:
strong belief in
acting to stop
climate change
potentially
protected)
Key Differences (cont.)
 Arbitration clauses
– Almost never seen
or allowed outside
the US
 Termination as a
tort
 Employee
handbooks
Employment Contracts
 Generally required outside of the US
for all employees
– Written or oral
– Some jurisdictions have language requirements (i.e.,
contract must be in local language)
– Some minimum terms often required:
• Names of parties
• Job title
• Pay rate
• Place of work
• Working hours
• Pension plan
Employment Contracts
(cont.)
 Term of contract
– Fixed term (e.g., 1 year)
– Open ended
 Probationary period
– Duration often limited
by law to 3-6 months
 Notice period for
termination
Termination of Employment
Common Law
– Relatively
easy
– Notice period
– Pay in lieu
Civil Law
– Not as easy
– Often must obtain
permission from
court or
government
– Often easiest to
negotiate
severance
Termination Notice

Generally required
everywhere but the
US

Minimum length
mandated by statute

In common law
countries, length
often must be
“reasonable,” which
may differ from the
statutory period

Tip – Specify notice
period in
employment contract
Pay in Lieu of Notice
 Same amount of pay as
length of notice (i.e.,
choice between 20
weeks’ notice or 20
weeks’ pay)
 Use must be specified
in employment contract
in some jurisdictions
 Lump sum or salary
continuance?
Various Termination Issues
 Constructive discharge
 Which jurisdiction’s law
applies?
 Can we get a release?
Will it be effective?
 Post-employment
restrictive covenants
Group Terminations
 Most jurisdictions have
special rules for group
terminations and/or
redundancies
 Information,
consultation and/or
bargaining obligations
– Employee
representatives
– Works council
– Trade union
Cost Cutting
 Different analysis than
in the US
 Generally based on
contract principles
 Unilateral change/
bilateral change
 Information,
consultation and/or
bargaining obligations
Collective Issues
 Works
councils
 Trade unions
Works Councils
Q: What is a works council
and what does it do?
A: A body of employees
who must be provided
information about and
consulted on various
matters affecting the
workplace.
Works Councils (cont.)
 Voluntary
 Whether they are allowed
depends on the number of
employees
– Minimum number is 5 in
Germany but 50 in Ireland
 Depending on the jurisdiction,
the works council may have
decision-making authority
over some matters
Works Councils (cont.)
Two types of works
councils:
1. Domestic
2. European
Domestic works councils
–
Established pursuant to
the EU Information and
Consultation Directive,
but many jurisdictions
had them already
Works Councils (cont.)
 European works councils
– EU Directive on European
Works Councils
– Handle issues affecting
more than one country
– Revised Directive effective
June 2011: establishes link
between European and
national level information
and consultation, and will
result in more complex multistage consultation
Trade Unions
 Most jurisdictions have
laws allowing employees
to be represented by a
trade union
 Power and prevalence of
unions varies widely from
country to country
 Method of becoming
unionized (e.g., card
check, vote etc...) varies
widely from country to
country
Employment Law Issues in
Global Restructurings
The key is to know which questions to
ask
Risks Unique to the
International Arena
AntiCorruption
Laws and the
Reach of
SarbanesOxley
(“SOX”)
SOX Civil Protections
Section 806:
Prohibits any “officer,
employee, contractor,
subcontractor, or agent”
of a company from
“discharging, demoting,
suspending, threatening,
harassing, or
discriminating” against an
employee who reports
conduct he “reasonably
believes” violates SOX or
any federal/state
securities laws
SOX Civil Protections
 Section 1107:
– Bars retaliation (including
interfering with lawful employment
of person) against:
• Employee
• Who reports truthful information to a law
enforcement officer
• About the actual or possible commission
of any federal offense
– Penalties can include fines and/or
imprisonment of up to 10 years
SOX Civil Protections
 Section 301:
– Requires public
companies to create
mechanisms for reporting
financial concerns
• Specifically requires
mechanisms
for handling
anonymous complaints
by employees
Extraterritorial
Application of SOX
 All foreign companies listed on US
exchanges must comply with SOX
 Where conduct has substantial nexus to
the US, courts will apply SOX
whistleblower provisions to foreign
subsidiaries
What’s at Stake for
Noncompliance with SOX
 Delisting from US
exchanges
 SOX criminal
sanctions apply
abroad
 Civil penalties
Whistleblowing Hotlines
Hotlines
Investigations
Not only admitted, but also mandatory under SOX:
§ 301 requires Companies to institute procedures
for handling «confidential, anonymous» employee
complaints about accounting or auditing matters
Is it in compliance with EU Laws? In general, NO.
Possible conflicts with:
 Privacy and data protection laws
 Employment laws
 Labor relations laws (“co-determination”)
Privacy and Whistleblowing
Hotlines Under EU Law
Whistleblowing schemes (including SOX hotlines) imply
data collection and so they “must be implemented in
compliance with EU data protection rules” (Opinion of the EU
Data Protection Working Party set up under Article 29
of the Data Protection Directive 95/46/EC, “WP117”, 2006)
SOX perspective:
Need to ensure financial security
in international financial markets
and to prevent frauds and
misconduct through internal
controls and reports
EU Directive perspective:
Need to guarantee the
fundamental right to protect
personal data of both the
whistleblower and the
accused person
WP 117: Need for a balance-of-interest-test in
adopting whistleblowing schemes
Anonymous Complaints
Across Europe
In the EU, the adoption of a whistleblowing hotline or of
an investigation scheme based on anonymous complaints
can come up against several issues:
Data protection
issues
McDonalds France and
CEAC/Exide Technologies
cases: French data
privacy regulator (CNIL)
refused permission to
establish anonymous
hotlines because of the
risk of collecting personal
data in violation of the
French data protection
law and of not informing
adequately the accused
employees about the
collecting and processing
of their personal data
Labor law
issues
Wal-Mart case: the
Employment Court of
Wuppertal (Germany) held
that a Code of Conduct
providing rules for
employees to use
a hotline to report
suspected Code violations
by co-workers needs the
consent of the Work
Councils under the codetermination procedure
provided by the German
labor law
Employment
law issues
Italian law: Italian
Employment Courts held
that, generally, anonymous
complaints are not relevant
and do not oblige the
employer to activate a
disciplinary procedure.
In any case, a disciplinary
procedure must comply with
specific obligations provided
by law and CBAs (procedure
to be adopted, right of reply
from the accused person,
proportionally).
What U.S. Companies Must Do
in Implementing SOX in EU
 Limit whistleblowing schemes to
the relevant areas (e.g., financial
and accounting)
 Need to focus on the fundamental
rights of individuals (especially for
data protection issues)
 Must comply with procedures set
by law or CBAs in monitoring
and/or sanctioning employees
 If needed, involve works councils
and negotiate whistleblowing
schemes with them
What U.S. Companies Must Do
in Implementing SOX in EU
 Maintain strict
confidentiality on the
complaint and any
investigative materials
 Use information
obtained only to
investigate alleged
misconduct
 Comply with local labor
provisions on
disciplinary procedures
The Foreign Corrupt
Practices Act (FCPA)
 Enforced by the SEC
and DOJ
 Anti-bribery +
recordkeeping
requirements
 SOX being used to
enforce the FCPA
 FCPA prosecutions
have greatly
increased in recent
years
Recent Crackdown on
Foreign Bribes
 February 2010: BAE
Systems, the world's
second-largest defense
contractor, agrees to pay
$400 million to resolve
allegations that it misled
the Defense and State
Departments about its
efforts to comply with the
FCPA.
 Department of Justice has
more than 140 open
investigations centering
on foreign bribes
Recent
Increase in
FCPA
Prosecutions
Countries with the Toughest
Enforcement Standards
1. Australia
7. Portugal
2. Bulgaria
8. Romania
3. Germany
9. Spain
4. Israel
10. Latvia
5. Japan
11. USA
6. Poland
Source: Global
Integrity Report
FCPA Compliance?
 A poll of over 1,000
executives conducted by
Deloitte Financial Advisory
Services found the following:
– 72% anticipated a rise in FCPA
enforcement...
– Yet 34% have no comprehensive
compliance plan
• National Law Journal, Sept. 15,
2009
Can You Stave Off Liability?
Department of Justice
“The goal is self regulation. If you have a
strong compliance program, you respond
quickly and you hold people accountable,
the DOJ is either not going to prosecute,
or reduce your fine.”
(Department of Justice Representative speaking at the
2009 Ethisphere Conference)
Effective Compliance
1. Exercise due diligence
to prevent and detect
criminal conduct
2. Otherwise promote an
organizational culture
that encourages ethical
conduct and a
commitment to
compliance with the law
Effective Compliance
 United States Sentencing Guidelines
1. Exercise due diligence to prevent and detect criminal
conduct and establish standards and procedures to
prevent and detect criminal conduct;
2. Promote an organizational culture that encourages
ethical conduct and a commitment to compliance with
the law;
3. Ensure that the corporation’s or organization’s
governing authority is knowledgeable about the
compliance and ethics program and that specific
individuals have day-to-day responsibility for the
program; and
4. Take reasonable steps to ensure that the compliance
and ethics program is followed, enforced and
evaluated.
NonCompetition
Agreements
Across
International
Borders:
Design and
Enforcement
Drafting
 Consideration
 Permissible scope
of restrictions
 “Garden leave"
and related forms
of payment
for noncompetition
Enforcement
 Court's ability/inclination to modify ("blue pencil")
 Challenges presented by mobility of workforce
across jurisdictions
 Restraining orders, injunctions and other
remedies
Drafting and Enforcement
 See handout for
overview of noncompetition
agreements in
Canada, France
and the UK
International
Assignments:
Overseeing
Expatriate
Programs
Formation of local business
entity
 Does the host country require the
formation of a local subsidiary,
joint venture or other entity which
will be the “employer”?
 Allocation of ownership interests
between US and foreign
investors?
Expatriate Agreement
 U.S. choice of law
and possible conflicts
with home country
public policy:
– EC Convention on the
Law applicable to
Contractual Obligations
(the “Rome
Convention”) provides
that “a contract shall be
governed by the law
chosen by the parties”
(Article 3).
Expatriate Agreement
 U.S. choice of law
and possible conflicts
with home country
public policy:
– Article 6: A contractual
choice of law in an
employment agreement
shall not have the result
of depriving the
employees of the
protection afforded to
them by the mandatory
rules of the law that
would apply in the
absence of such choice.
Expatriate Agreement
 Practical tips for
ensuring application
of U.S. law:
– Clear and conspicuous
contractual choice of
U.S. law, applying to the
entire employment
relationship and to the
secondment (posting)
arrangement. See
Article 3 of Rome
Convention.
Expatriate Agreement
 Practical tips for
ensuring application
of U.S. law:
– Consider repatriating the
seconded employee to the
U.S. before termination of
employment.
– Temporary and limited
nature of assignment, with
expectation of repatriation
after a defined period
of time.
Expatriate Agreement
 Termination of assignment for any reason,
with or without notice.
 Repatriation at end of assignment – at a
defined point in time, or subject to the
Company’s sole and absolute discretion.
 Expected duration of assignment – reserve
Company’s right to terminate temporary
assignment early.
 Conflicts of Interest
 Confidentiality and trade secrets provisions.
Collective Bargaining
Agreements
 For example, in
France and
Germany, the
employer must
inform, and in some
cases consult, the
local works council
when hiring a
foreign employee.
Language Requirements
 Mandatory Host Country Language
Requirements:
– E.g., France: if employer fails to draft
employment agreement in French, cannot
enforce it against employee
Compliance With Home
Country (U.S.) Laws
 Assignee agrees to comply with all applicable
home country laws and regulations, including
U.S. laws that have extraterritorial reach, e.g.:
– The Foreign Corrupt Practices Act
– Sarbanes-Oxley Act accounting fraud, reporting and
“whistleblower” provisions (and possible conflicts with
EU Directives, CNIL decisions)
– Anti-discrimination laws.
Termination and
Repatriation
If repatriation to the
U.S. before
termination is not
practicable, evaluate
the risks and
potential exposure
for “abusive” or
wrongful termination
under host country’s
laws.
QUESTIONS?
Thank You
for your time
COPYRIGHT 2010, LITTLER MENDELSON, P.C.