Global Employment Law and Equity Compensation Developments .../media/Files/Insights/... ·...
Transcript of Global Employment Law and Equity Compensation Developments .../media/Files/Insights/... ·...
GLOBAL EMPLOYMENT LAW AND EQUITY COMPENSATION:DEVELOPMENTS TO WATCH IN 2014
Ute Krudewagen, Partner
Dean Fealk, Partner
ACC Austin CLE LuncheonJune 19, 2014
This presentation is offered for informational purposes only, and the content should not be construed as legal advice on any matter.
AGENDA
Employment and equity compensation considerations and pitfalls for companies entering new countries
Engagement options
Documentation
Mobile employees and expatriate assignments
Considerations and frequently asked questions on equity compensation by companies going international
Global compliance challenges for companies expanding abroad
Thinking ahead: employee disengagement
2Global Employment Law and Equity Compensation June 19, 2014
EMPLOYMENT AND EQUITY COMPENSATION CONSIDERATIONS
AND PITFALLS FOR COMPANIES ENTERING NEW COUNTRIES
GLOBAL EXPANSION STRATEGIES
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Compliance
Business Plan and
Projections
Employment
Global Equity,Benefits
Tax
CorporateIntellectualProperty
Data Privacy
Import/Export
Global Employment Law and Equity Compensation June 19, 2014
ENGAGEMENT OPTIONS
ENGAGEMENT OPTIONS
Employees IndependentContractors
Agency Workers
PEO Employees
Local corporatepresence required?
What quacks like a duck is a duck
Permissible? Are joint employees and need to comply with all applicable employee laws
Payroll registrations? Withholding obligations(VAT, GST)?
Employee leasing laws?
Employee leasing laws?
Benefits? Registration obligations?
Limitations on time or type?
Limitations on time or type?
Fixed term? Sales agent rules? Equal pay obligations?
Joint liability
• Equity compensation?
Equity compensation?
Equity compensation?
Equity compensation?
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BREAKING NEWS: limitations on use of dispatch workers in China
Dispatch workers may be used only for temporary (up to six months), auxiliary (supporting the core business), or substitute positions (to replace an employee on leave, training, etc.)
No more than 10% of a hiring company’s total workforce can be made up of dispatched workers; transitional period of two years for companies currently above 10% limit
Detailed regulations in some cities
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DOCUMENTATION
EMPLOYMENT DOCUMENTATION
A global strategy for documenting the relationship is key
Sources
Statute Collective bargaining agreements Case law
Strategy
Global, local or hybrid approach
Documentation
Offer letter Employment agreement Handbooks and policies Proprietary information and inventions assignment
agreement (PIIA) Non-competes and non-solicits Commission and bonus plans Data privacy notice Stock option documentation
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HANDBOOKS AND POLICIES
Alternatives Codes of conduct Policies Work rules, internal regulations Handbooks
Approaches Global, local or hybrid
Common Topics Discrimination, harassment, bullying Social media, BYOD Privacy / data protection Anti-corruption Whistleblowing
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PROPRIETARY INFORMATION AND INVENTIONS ASSIGNMENT AGREEMENT
Areas of greatest risk
IP assignment / ownership and enforcement Preventing employees from exploiting confidential information when moving to a competitor Post-termination restrictive covenants
Common themes
What is the legitimate business interest? What is necessary to protect the interest?
Enforceability and enforcement varies from country to country
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EUROPE: post-termination non-competes
Generally enforceable if there is a legitimate purpose (subject to reasonableness restrictions)Compensation generally required for enforcement of the non-competeGenerally not enforceable
SpainPortugal
France
Germany
Italy
Belgium
Ireland
UK
Austria
Denmark
NetherlandsNorway
Poland
Romania
Sweden
Russia
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ASIA PACIFIC / MIDDLE EAST: post-termination non-competes
China
India
Thailand
SingaporeMalaysia
Indonesia
Philippines
Taiwan
Hong Kong
Japan
South Korea
Saudi Arabia
Israel
Turkey
Vietnam
U.A.E.
Australia
Generally enforceable if there is a legitimate purpose (subject to reasonableness restrictions)Compensation generally required for enforcement of the non-competeGenerally not enforceable
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UNITED STATES: post-termination non-competes
Enforceable if there is any legitimate purposeLimitation on enforcement or additional requirements, e.g. receipt of confidential information or consideration beyond mere employment, limitations on blue pencilingUnenforceable
WA
OR
CA
NV
AZ
UT
ID
MT
WY
CO
NM
AKHI
TX
OK
KS
NE
SD
ND
MN
IA
MO
AR
LA
MS AL GA
FL
SC
NCTN
KY
IL
WIMI
IN OH
VAWV
PA
NY
MEVT
NHMA
CTRI
NJ
MDDE
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LATIN AMERICA: post-termination non-competes
Argentina
Chile
Brazil
Columbia
Peru
Venezuela
Compensation generally required for enforcement of the non-competeGenerally unenforceable
Mexico
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INTERNATIONAL STOCK AWARDS
Omnibus plans
International sub-plans
International award agreements
What are the trends?
Translations
Electronic acceptance
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MOBILE EMPLOYEES AND EXPATRIATE ASSIGNMENTS
WHO SHOULD BE THE EMPLOYER?
Alternative #1: Direct contract with host country employer (‘localization’)
Home Country, Inc.
Host Country, Inc.
Transferemploymentrelationshipthroughtermination &hire
Alternative #2: Secondment
Keep existing employment with home country employer and second or loan to host country employer
Home Country, Inc.
Host Country, Inc.
Seconded
Service Fee
Alternative #3: Transfer followed by Secondment
Transfer employment relationship through termination & hire and then second or loan to host country employer
Home Country, Inc.
Host Country, Inc.
SecondedService Fee
Global Employment Company (“GEC”)
Home Country, Inc. (dormant)
Host Country, Inc.
Maintain dormant employment relationship with home country employer; enter into active employment relationship with host country employer
Alternative #4: Transfer with dormant home country employment relationship or dual employment
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BREAKING NEWS: Current Global Mobility Challenges
Increased focus on compliance (individual income tax, immigration, social charges, benefits, corporate tax, etc.) China: Circular No. 19
India: Delhi High Court Centricaruling
Global employment companies or GECs increasing in popularity
Impact on stock awards
Global equity hotspots: Russia, China, Argentina, Australia
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CONSIDERATIONS AND FREQUENTLY ASKED QUESTIONS ON EQUITY COMPENSATION BY COMPANIES
GOING INTERNATIONAL
EQUITY AND COMPENSATION CONSIDERATIONS FOR GOING INTERNATIONAL
Primary compliance considerations: Plan design Flexibility for international grants. Employee income tax and social insurances
Maximize incentive value and avoid unintended tax pitfalls. Employer withholding is paramount.
Securities laws Regulated as a financial instruments means registration and or disclosure requirements Often exemptions apply.
Exchange control / foreign exchange Cross-border fund flow can be restricted or trigger disclosures
Data privacy US remains among the least regulated data privacy countries. Managing a plan from the US triggers requirements in other countries.
Employment laws Structure award to reduce risks and associated costs.
Why does compliance matter? Equity is preferred
vehicle for startup growth
Stay focused on company growth and improve footing for ultimate liquidity event
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FAQ ON GLOBAL EQUITY COMPENSATION
Are stock awards understood and popular outside the US?
Are certain types of awards more popular?
Can I grant incentive stock options (ISOs) outside the US?
Can I grant stock awards to independent contractors outside the US?
I have a limited budget; what is the most cost effective way to grant overseas?
Can I grant stock awards outside the US?
What do I need to do to grant stock awards outside the US?
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GLOBAL COMPLIANCE CHALLENGES FOR COMPANIES
EXPANDING ABROAD
GLOBAL COMPLIANCE CHALLENGES
Codes & whistleblower
hotlines
Dataprivacy
Attorney-Client Privilege
Anti-briberyProblem
countries for equity awards
Cross-border investigations
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THINKING AHEAD: EMPLOYEE DISENGAGEMENT
PROBATIONARY PERIODS
Permissible?Length of
probationary period
Monitoring/tracking
Impact of probationary period on exit
strategy
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PERFORMANCE MANAGEMENT
Challenging to dismiss for
performance in many countries
Importance of process
Importance of documentation
Paying out severance may be
alternative in a few jurisdictions permitting
terminations without cause
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REDUNDANCIES
Threshold for redundancy can be high
Protected employees Selection
Process Consultation Notice
Severance Releases: do they work?
Mass layoff requirements
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$ $
Thank You
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Ute Krudewagen is a partner in DLA Piper's Labor and Employment group.
Based in Silicon Valley, Ms. Krudewagen focuses on providing multinational companies with solutions to the challenges presented in managing a global workforce. In addition, she counsels companies on employment issues triggered by cross-border transactions.
Ms. Krudewagen advises international and cross-border clients on a broad range of complex labor and employment matters, including background checks, employment agreements, discrimination and harassment claims, social media issues, global policies and procedures, non-compete and proprietary information agreements, works council and union issues, codes of social responsibility, workplace privacy, employee assignments and global mobility programs, global reductions in force, and severance and retention plans.
She also counsels global companies on employment issues associated with transactions, including cross-border mergers and acquisitions, outsourcing transactions, post-acquisition integrations and tax restructurings. Her experience includes successfully addressing employment issues in transactions with workforces in more than 60 jurisdictions, with deal values ranging from US$2 million to more than US$8 billion, including negotiation and drafting of the deal agreement, employee transfers, consultations with unions and works councils, benefits harmonization, interim operating models and acquisition-related downsizings.
A frequent author, Ms. Krudewagen has been published in Workspan, The Daily Journal, Association of Corporate Counsel Newsstand, The Recorder, California Employment Law Magazine and Worldwide Financier, among others. She has also presented on international labor and employment topics at leading industry events, including the Women in International Trade, SHRM and National Trade Counsel conferences.
Legal 500 has named her a recommended lawyer for workplace and employment counseling. She has been recognized as a Rising Star by Super Lawyers of Northern California (2011, 2012 and 2013). She is listed in the Daily Journal's 2013 list of "Top Women Lawyers," which recognizes the top 100 female lawyers in California. She is recognized by Top Attorneys as one of Northern California's Outstanding Young Lawyers.
Ute KrudewagenPartner
[email protected] T: 650 833 2245
Silicon Valley Office2000 University Avenue
East Palo Alto, California 94303
Ute Krudewagen – Global Labor and Employment
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Dean Fealk heads the Global Equity practice at DLA Piper. He advises leading multinational companies on a wide range of legal and strategic issues related to doing business overseas. He frequently serves as managing international legal counsel for multijurisdictional and multi-disciplined projects and matters implicating corporate, securities, regulatory, tax, labor, foreign exchange and data privacy. Mr. Fealk has considerable experience in cross-border equity-based compensation programs and international employment matters in Asia, Europe, Latin America, the Middle East and Africa.
The Los Angeles and San Francisco Daily Journal has selected Mr. Fealk for its lists of California's "Top 20 Attorneys under 40" and "Top 75 Labor & Employment Lawyers." The Silicon Valley/San Jose Business Journal has named him to its list of "40 Under 40" movers and shakers in the Silicon Valley who impact their businesses and communities. He has been designated a Marshall Memorial Fellow by the German Marshall Fund and named a US-Spain Council Young Leader; both these honors recognizing the next generation of American leaders. The New Leaders Council selected Mr. Fealk for its "40 under 40 Leadership Award," celebrating young leaders across the nation for their involvement in entrepreneurship, advocacy, media and politics.
Mr. Fealk regularly counsels on international and cross-border aspects of international data privacy, immigration, intellectual property protection, choice of entity, tax and corporate structure. He also advises on a broad array of international employment matters including codes of conduct, employee handbooks, work rules, personnel policies, independent contractor agreements, offer letters, employment agreements, proprietary information and assignment of invention agreements, secondment agreements, lay-offs and redundancies, discipline and terminations, settlements and release and waivers.
On the transactional side, Mr. Fealk has provided counsel on more than US$30 billion in cross-border deals, among them mergers, acquisitions, divestitures, restructurings and integrations. He has led over a hundred international expansion and structuring projects for companies across a wide spectrum of industries and jurisdictions from emerging enterprises to Fortune 500 multinationals. Representative industries include high tech, financial services, pharmaceuticals, consumer products, life sciences, energy, media, manufacturing and distribution.
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Dean FealkPartner
[email protected] T: 415 836 2521
San Francisco Office555 Mission Street
Suite 2400San Francisco California 94105-2933
Dean Fealk – Global Labor and Employment
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DLA PIPER – GLOBAL COVERAGE
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