Labor: When Laws and Cultures Collide

Most human resources professionals in the United States are quite familiar with the doctrine of employment at will, which allows employers to discharge most employees for any reason or for no reason-- as long as the termination is not the result of unlawful discrimination. To take advantage of the discretion afforded to management by at-will employment-- which typically is articulated as a policy in the employee handbook and is applicable to all who do not have written employment agreements)-- most U.S. employers do not provide employment contracts to the vast majority of their employees, and thus do not limit their ability to terminate employment without notice and without payment of severance to the employee.

In contrast, the at-will doctrine does not exist in most other countries. Throughout Europe, Asia, South America and North America excluding the U.S., most employees at every level have an employment contract and may also enjoy statutory guarantees that if they lose their jobs, they will receive a variety of termination benefits, including severance. Thus, employees outside the U.S. often expect that their employment will continue until they retire--and employers outside the U.S. are often reluctant to hire new employees for the very reason that they take on a lifelong commitment by doing so.

This perceived right to lifelong employment is ingrained in the culture of many countries and can lead to thorny legal issues when an employee ventures out of his or her home location. Take, for example, the U.S.-based company that moved an Italian employee--who worked under contract at its affiliate in Milan--to work in Argentina under a contract that specified that U.S. law would apply to the employer-employee relationship. When the employment relationship soured and the employee was discharged for poor performance, the U.S. employer initially expected to give the employee nothing more than a farewell luncheon. The company was surprised to learn that the employee, who was used to working in Europe, had an expectation of unlimited continued employment and that Argentine law agreed with the employee-- providing for generous statutory severance payments and benefits unless the employee had been discharged for serious wrongdoing.

When laws and cultures collide, human resources professionals need to be prepared. The first question is always "does the employee have an existing contract?" The second is "Where was the contract made, and what law applies to it?" Whenever an employee has a contract, the rights of the employee and the obligations of the employer need to be assessed-- as does whether the contract can be terminated easily and lawfully. If the employee is coming to work in the U.S. after a tenure in another country, it may be very important to terminate the employee's non-U.S. contract before moving him or her to the U.S., to avoid the risk of multiple claims by the employee and inconsistent obligations on the part of the employer. At the same time, the non-U.S. employee-- who may not intend to remain indefinitely in the U.S.-- may require some assurance that he or she can return to the home country at a certain time and reacquire the non-U.S. rights and benefits often afforded by a non-U.S. employment contract. Similarly, when a U.S. employee relocates to another country and receives a standard local employment agreement but retains the right to return to the U.S. at some future date, the U.S. employer should make certain that the employee does not retain his non-U.S. contract rights upon return to the U.S., that the U.S. employer is not saddled with any conditions that it may not be able to fulfill upon the employee's return (such as providing a specific job to the employee, which may not in fact be available at the time) and that there is no impediment to the employee regaining employment-at-will status upon return to the U.S.

By considering these issues before an employer undertakes to relocate an employee from one country to another, unpleasant and potentially costly surprises can be avoided all around.

Read Barbara Roth's previous column.

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Barbara Roth

Barbara Roth is a partner at Hogan Lovells. She represents management exclusively in all types of employment litigation and advises clients on...

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