Global Workforce and Mobility: Opportunities and Risks. ogletreedeakins.com Presented By: Bernhard...

Global Workforce and Mobility:

Opportunities and Risks

.

ogletreedeakins.com

Presented By:

Bernhard Mueller (Columbia, SC)

Atlanta / Austin / Berlin / Birmingham / Boston / Charleston / Charlotte / Chicago / Cleveland / Columbia / Dallas / Denver / Detroit MetroGreenville / Houston / Indianapolis / Jackson / Kansas City / Las Vegas / London / Los Angeles / Memphis / Mexico City / MiamiMinneapolis / Morristown / Nashville / New Orleans / New York City / Orange County / Philadelphia / Phoenix / Pittsburgh / Portland / Raleigh Richmond / San Antonio / San Diego / San Francisco / St. Louis / St. Thomas / Stamford / Tampa / Torrance / Tucson / Washington, D.C.

www.ogletreedeakins.com

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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



Tax Considerations

Permanent Establishment Treaty or local law

Bilateral Tax Treaty Fixed Place of Business Contract Authority

Business

ContractTerms

Tax

Immigration

Benefits

EmploymentLaw



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



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



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



End of Assignment Issues

Address in the international assignment agreement

End of assignment/end of employment relationship

Return/localize

Relocation benefits

Reassignment

Severance



Happy to answer any questions

Bernhard MuellerOgletree Deakins Law Firm

International Practice [email protected]

(803) 227-0844

mailto:[email protected]

Global Workforce and Mobility: Opportunities and Risks. ogletreedeakins.com Presented By: Bernhard...

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