If you are responsible for expatriation of U.S. citizens, you need to be aware of a wide range of issues that create unique (and often costly) challenges in recruitment of talent for international assignments. For the most part, employment laws are very different in the U.S. than in the rest of the world, which can make employing American citizens in other countries complicated. You should pay particular attention to these issues:
1. Employment at-will is only applicable in the United States.
Employment law around the world can easily be divided into two conceptual parts: employment at-will doctrine (only the U.S.) and the use of employment contracts (everyone else).
Philosophically, labor laws in the U.S. are generally very pro-business, while labor laws in other countries are pro-employee (indefinite employment). Outside the U.S., labor laws regulate how, when and why an employer can terminate an employment relationship. On the other hand, in the U.S. termination of the employment relationship can occur without cause.
From the perspective of U.S.-headquartered multinational companies, terminating employees becomes significantly stricter, more complex and more expensive once the employee steps outside the U.S. Many foreign employment termination laws impose lengthy notice periods, large severance pay awards and complex, unmanageable pre-termination procedural steps.
The definition of “good cause” in virtually every country is different, and there are very few situations (outside the U.S.) in which an employer would not be held liable for severance pay. Severance settlements are calculated as a multiple of annual earnings, and in the EU particularly, termination settlements can amount to two to three years of earnings or more. For example, an employee in Belgium that is wrongfully terminated may be entitled to up to eight years of earnings.
There are also additional employment law concepts related to indefinite employment, such as constructive discharge and vested rights. Constructive discharge means changing the terms of employment to such an extent that the employee wants to leave – forcing the employee out without incurring liability for severance pay. Such an act is not allowed without payment of severance.
In these cases, the employee places a claim against the employer for changes made to the terms and conditions of their employment (the employee’s vested rights), stating it is a form of constructive discharge and is not allowed without payment of severance.
2. In the U.S., fewer aspects of the employment relationship are regulated.
The U.S. is one of the few countries that does not have mandatory vacation laws. In the
EU, there are numerous laws that relate to employee benefits (statutory benefits), caps on hours worked, vacation allowances, holidays, sick leave, maternity/paternity leave, written employment contracts and more. By comparison, the U.S. has only a few laws such as the Family and Medical Leave Act (FMLA), HIPAA and the FLSA, but these only provide minimal benefits when compared to the level of benefits provided by European employment law requirements.
In stark contrast to more lucrative European, Latin American, and even African and Asian standards, FMLA is truly minimalist as there is no paid leave. Employees who take maternity leave or FMLA do not have a legal right to pay. FMLA only provides employees with up to 12 work weeks of unpaid, job-protected leave a year, and it requires group health benefits to be maintained during the leave as if employees had continued to work instead of taking leave.
U.S.-headquartered companies with employees in foreign countries certainly need to be cognizant of these differences and the costs associated with them, but it is also important to note that the recruitment of top talent from other countries into the U.S. is often negatively affected by these differences in benefits.
3. U.S. employment laws do not mandate written employment contracts.
In the U.S., employers are highly reluctant to provide employment agreements or written contracts due to employment at-will. The reality in the U.S. is that employment agreements are still typically oral agreements and at best a basic offer letter that includes the bare essentials of start date and rate of pay.
In the EU there is actually a directive that requires written employment agreements or statement of terms and conditions of employment, referred to as “statements of employment particulars.” These specify the place of work, pay rate, title, office hours, etc. and cannot be modified without written agreement from the employee.
Many U.S. employers have not properly researched the employment laws of the country of assignment and have learned the hard way that assuming that U.S. employment regulations and practices will be applicable while their assignee is abroad can be very costly and time consuming. Further, legal resolution of terminations outside the U.S. are tedious, requiring significant time of both local (host country) and corporate management and can incur legal fees in both the U.S. and host country. In addition, if the company loses a labor court case, monetary penalties can be very substantial.
So what can you do to avoid these situations? Here are some tips:
- Never, ever terminate any employee (U.S. citizen) working outside the United States without advance planning and advice of an international labor/employment attorney.
- If an employment contract is not prepared, it is critical to develop a Letter of Assignment that denotes all of the assignment benefits, allowances, specifics of the global nature of the work assignment and annotates the local rules and customs. The Letter of Assignment (or an actual employment contract if legally required) must address all of the relevant provisions and usual concerns of the expatriate while also being enforceable abroad.
- Since there are always a number of things outside of the control of either the company or the assignee that may impact the extent to which the obligations contained within the LOA or Employment Contract are enforceable and capable of being fulfilled, a U.S. multinational company/U.S. citizen should keep in mind that:
- In the event of a companywide merger or acquisition, the LOA or Employment Contract may be rendered null and void, especially if the new organization’s owners are of a different nationality than the ones with whom the LOA/Agreement was signed.
- The relationship the U.S. headquarters (employer) enjoys with the host country may impact the way in which the LOA/Contract clauses are viewed and enforced.
- Any terms and conditions negotiated will be invalid if they conflict with the local law of the host country.
- The Letter of Assignment/Employment Contract should always include the grounds for termination accompanied by a section that defines the notice and termination terms in order to prevent any issues. If this is not included in the LOA/Contract, the laws of the host country may be applied, and this will impact the notice period and the amount of severance pay that the expatriate will be entitled to.
Did you find this information helpful for your U.S. expatriate programs? We hope so! This is the first in a series of articles on assignment challenges unique to American expatriation. Stay tuned for those upcoming features on taxation, banking, recruitment and more.