Global Workforce and Mobility:
Opportunities and Risks
.
ogletreedeakins.com
Presented By:
Bernhard Mueller (Columbia, SC)
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Agenda
Types of Assignments, Basic Terms – Business Considerations
Legal issues implicated by these moves:1. Business Considerations
2. Immigration Law
3. Employment Law
4. Contract Law
5. Benefits
6. Taxes (payroll and corporate)
Ancillary Documents
Ending the Assignment
Questions
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Legal Considerations Implicated by All Mobility Assignments
Business Issues and Corporate Structures
Immigration Employment Laws Contractual Matters Benefits Tax Consequences
Business
ContractTerms
Tax
Immigration
Benefits
EmploymentLaw
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Non-U.S. Employment Law Principles
No at-will employment Leave and other myriad entitlements Procedural rights for discipline Notice and severance rights for termination Hiring quotas for certain minority categories
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You kidding me? That can’t be right! Netherlands Terminations require either (a) a
permit or (b) “urgent cause” (employer must prove) and immediate notification to the employee
SpainEmployer must give written notice of the grounds for dismissal – and can’t rely on any after-acquired grounds
China Employer is required to enter open-ended contract after 10 consecutive years of service or two consecutive fixed-term contracts
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Business Considerations
Types and Duration of Assignments Outbound Inbound Short Term Long Term
Business Need for Assignments Executive leadership Training Taking on customer contract Exploring new market Events
Business
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Options for a Workforce Abroad
Second US employee to host-country entity
Hire localized employee to host-country entity
Engage independent contractor
Use host-country staffing agency
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Secondment: What is it?
U.S. company and a host-country entity enter into an agreement where a U.S. employee will temporarily become an employee of the host-country entity.
Host-country entity is usually, but not always, a corporate affiliate.
Host-country entity is responsible for compliance with local laws.
U.S. entity often reimburses host country’s expenses in connection with employing the individual.
Secondment: Pros and Cons
Pros If entity already exists,
no costs of setup U.S. employment law is
more likely to stick to relationship
More likely to maintain at-will status
Cons If no local entity (e.g.
distributor, reseller, commercial agent) exists, cost of setting up entity
Risk of permanent establishment for U.S. entity
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Secondment: Documents Needed Secondment Agreement between U.S. entity and host
country entity Spell out which entity is responsible for what Transfer pricing arrangements
Underlying employment agreement Expatriate Agreement or Letter of Assignment
Choose U.S. law to apply to disputes Where possible, place burden on employee to comply with local
laws (e.g. regarding taxes and immigration) Spell out benefit entitlements, including any special expatriate
benefits Include what happens after assignment ends
Option 2: Hiring Local Employees
Pros Clarity of legal
obligation No risk of permanent
establishment for U.S. parent
Cons Cost of setting up
subsidiary (if none exists)
Host country employment laws apply
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Local Employees: Documents
Employment agreement – written contract required in many countries
Make sure compliant with local laws
Note that some countries require contracts to be in local language and/or bilingual (and local language version trumps)
Option 3: Independent Contractor
Pros Less monetary
investment Less legal involvement
(if properly classified)
Cons Less control Risk of
misclassification Jurisdictions scrutinize
these arrangements (China)
Smaller talent pool
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Consider Independent Contractor Relationship where:
The host country does not permit employees without a host country entity in place
The host country permits independent contractor relationships (or client understands and is willing to take the risk)
The relationship is actually one of an independent contractor
Arrangement is experimental or temporary
Company has no desire to make substantial investment in the particular country
The contractor won’t have access to your confidential information
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Similar considerations to U.S. domestic agreement Use appropriate title (“Independent Contractor” or “Consulting”
Agreement) Establish and emphasize the parties’ understanding of
independent contractor status Avoid exerting control over the means by which the work is
performed Avoid providing tools and equipment Avoid requiring exclusivity
Payment considerations: How to pay? Which currency? If possible, use invoicing.
Independent Contractor Drafting Tips
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Spain Contractors devoting 75% of time to one client have annual leave rights
(18 days)
France Company must make withholdings and deductions similar to employers for a certain category of self-employed freelancers
Australia “Fair Work Act” protects independent contractor’s right to associate (trade unions)
Laws Protecting Contractors
Option 4: Temporary Staffing Agency
Pros Minimal administrative
burden Compliance with local
law is in the hands of the agency
Cons Can be costly Less control Some legal risk that
temporary employees have same rights as recipient company’s employees (e.g. China)
Quality and availability varies by country
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Consider a Staffing Agency Where:
The local entity does not permit independent contractor classification
Opening a subsidiary is not desirable
Hiring multiple host-country employees
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Staffing Agency: Drafting tips
Documents needed Temporary employment agreement (between staffing
agency and employee)
Contract with staffing agency (e.g., “Services Agreement”)
Clearly place burden of compliance on service provider to the extent permissible under applicable law
Include indemnification Make clear to employee that service provider employs
employee
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Temporary Staffing Agency- pitfalls
Outsources employment obligations to local company
BUT this is not a failsafe
- Potential liability where service provider makes mistakes
AND some countries are cracking down on this practice
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Immigration Considerations
Most countries require visa for entry
All countries, including US, require specific work authorization for foreigners
Accompanying spouse often not allowed to work
Can be quite time-consuming and costly
Requires planning well in advance of assignment
Frequently overlooked or delayed in the expat planning process
ImmigrationBusiness
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Vet the following issues before deciding to proceed with an international assignment: Entity: Does the employer have an entity in destination
country? Feasibility Timing Limitations on business visitor status & work activities
(Don’t forget: Spouses)
Visas for Expats—Critical, Fundamental, Practical Issues
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Employment Law Considerations
Example: Swiss employee sent to U.S. for a two-year assignment
How to address Swiss vs. U.S. employment agreement and relationship
Choice of law considerations
Mechanisms for reducing risk to Employer
Business
ImmigrationEmployment
Law
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Key Contract Terms for Expat Agreements Compensation: amount, source, assignment-
related payments and benefits as distinct from ordinary compensation
Working hours, holidays Data privacy Choice of law provision Identify legal employer Limits on employee’s right to represent host
company Application of policies, procedures and benefits Contingencies: e.g., work permit requirements Termination provisions relating to the
assignment Prohibition against duplicate benefits Other market benefits
Business
Immigration
Contract Terms
EmploymentLaw
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Assignment-Related Discretionary BenefitsLong Term Expat Pre-assignment visit Shipment of personal effects Housing: temporary accommodation and long-term Relocation allowance Cost of living allowance Work permits for family members Tuition Travel stipend Language training Health insurance coverage Tax equalization Reduce/eliminate overtime
Short Term Expat Housing, travel
Business
Immigration
Contract TermsBenefits
Employment Law
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Tax Considerations
Permanent Establishment Treaty or local law
Bilateral Tax Treaty Fixed Place of Business Contract Authority
Business
ContractTerms
Tax
Immigration
Benefits
EmploymentLaw
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Tax Considerations
Permanent Establishment Inbound/outbound Impact of maintaining foreign employment agreement on U.S.
permanent establishment risk Short term/long term
“Deemed services” provisions in tax treaty India, China, Indonesia
Authority to “Conclude Contracts” for Home Company
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Tax Considerations
Payroll taxes Treaty or local law
183 days in any 12 month period Inbound/outbound Short term/long term
Social Security Totalization Agreement
How to manage Split payroll Shadow payroll
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Additional Documentation
Additional Documentation Affecting the Assignment Agreements with Host Country Affiliates
Intra-Company Agreement
Intra-Affiliate Agreement
Confidentiality Agreements
Restrictive Covenants
Tax Equalization Benefit Agreement
Expat/Relocation Benefits Policy
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End of Assignment Issues
Address in the international assignment agreement
End of assignment/end of employment relationship
Return/localize
Relocation benefits
Reassignment
Severance
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Happy to answer any questions
Bernhard MuellerOgletree Deakins Law Firm
International Practice [email protected]
(803) 227-0844