Top 5 Labor and Employment Concerns for U.S.-Based Multinational Businesses
In the first installment of our four-part video series, two of our International Practice Group shareholders, Carson Burnham, chair of the practice group, and Diana Nehro, a shareholder in our Boston and Stamford offices, discuss the top five labor and employment concerns for U.S.-based in-house counsel with operations abroad. Tune in for a discussion about managing the absence of at-will employment, investigating violations of U.S. laws abroad, globalizing discrimination and harassment policies, handling mobility assignments, and creating global sales incentive plans.
Carson Burnham: Hi, I’m Carson Burnham and I head up the International Practice Group here at Ogletree.
Diana Nehro: And I’m Diana Nehro, a shareholder in the practice group. We are here today to talk about the top 5 concerns for U.S.-based in-house counsel who deal with international employment issues.
Burnham: Number 1 is the absence of “at will” employment outside the U.S. “At will” employment is unique to the States. So if I hire someone in the U.S., even if he’s the world’s best employee, I can terminate his employment for no particular reason, as long as it isn’t an unlawful or discriminatory reason. But in any other country, I can’t fire him except under very narrow circumstances. Once hired, he is entitled to the same or better title, compensation, and responsibilities throughout the job.
Nehro: Our second big concern involves investigating violations of U.S. laws abroad. When a U.S. employer receives a complaint from a foreign subsidiary’s employee, the employer must walk a tightrope between following local law while also ensuring compliance with U.S. law.
Burnham: What kinds of U.S. laws apply overseas?
Nehro: Good question. The Foreign Corrupt Practices Act is a big one. And Title VII may apply when there is a connection to a U.S. decision maker. The challenge is that there are often inconsistencies between local law and U.S. federal statutes and the employer must make a difficult decision when there is no way to comply with both.
Burnham: Speaking of harassment investigations, the Number 3 challenge is globalizing discrimination and harassment training and policies. In some countries, “unlawful harassment” carries a broad meaning that includes generalized harassment or “bullying,” which occurs when an employee is unfairly treated, or mocked, or pressured and sometimes even overworked.
Nehro: Our Number 4 issue is mobility. There are five areas of law implicated by a mobility assignment, often in conflict, sometimes overlooked: employment law in two countries, immigration, payroll and corporate tax, benefits, and contract law. For example, companies without a local legal presence sometimes want to keep expatriate employees abroad on a U.S. payroll to comply with 401(k) or social security reasons—as well as to preserve U.S. at-will employment.
Burnham: So what is the problem?
Nehro: Tax is one problem. The mere act of having a U.S.-payrolled employee working in a foreign country can give rise to a permanent taxable presence of the U.S. company that may subject the U.S. employer to corporate taxation in that country.
Burnham: Our Number 5 concern is global incentive plans. When companies roll out their U.S. sales plans to foreign employees, expensive consequences can result.
Nehro: How can they still have a sales incentive or bonus plan that is consistent—or as consistent as possible—across multiple jurisdictions?
Burnham: Good drafting. With regard to sales plans, the most important thing for employers to think about in every country—especially the U.S.—is to carefully define how sales incentive pay is "earned." And acquired rights is another hot issue in the sales plan world. Changing targets, or reducing payouts year to year, may be difficult.
Thanks for your time today. We hope you’ve learned a few things about our International Practice Group and the types of issues that we can help you and your company address.