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EY Human Capital Conference 2012: Global employee mobility - managing the legal minefield

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This presentation considers why it's important to consider employment law issues and employment law throughout the assignment life cycle including:
► Transfer of personnel — use and status of secondment agreements
► Assignment letters
► Assignment policies
► Provision of local benefits to assignees
► Repatriation considerations
► Termination of assignees during the assignment
► Post-assignment considerations
► Tracking of amounts owed to the company
► Localizations

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EY Human Capital Conference 2012: Global employee mobility - managing the legal minefield

  1. 1. 2012 Human Capital Conference23–26 October Managing the legal minefield
  2. 2. Disclaimer► Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited located in the US.► This presentation is ©2012 Ernst & Young LLP. All rights reserved. No part of this document may be reproduced, transmitted or otherwise distributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP. Any reproduction, transmission or LLP reproduction distribution of this form or any of the material herein is prohibited and is in violation of US and international law. Ernst & Young LLP expressly disclaims any liability in connection with use of this presentation or its contents by any third party.► The views expressed by panelists in this session are not necessarily those of Ernst & Young LLP LLP.Page 2 Managing the legal minefield
  3. 3. Presenters► Jos Griffioen ► Roselyn S. Sands y ► Cargill Inc. ► Ernst & Young Société ► jos_griffioen@cargill.com dAvocats ► roselyn.sands@ey-► Dr. Karsten Umnuss avocats.com ► Ernst & Yo ng La GmbH Young Law ► karsten.umnuss@de.ey.comPage 3 Managing the legal minefield
  4. 4. Agenda► Introductions► Why it is important to consider employment law issues► Employment law throughout the assignment life cycle: ► Transfer of personnel — use and status of secondment agreements p g ► Assignment letters ► Assignment policies ► Provision of local benefits to assignees ► Repatriation considerations ► Termination of assignees during the assignment ► Post-assignment considerations ► Tracking of amounts owed to the company ► LocalizationsPage 4 Managing the legal minefield
  5. 5. Global mobility: why employment lawmatters► Cross-border movement of employees means that p y multiple jurisdictions’ laws could apply; therefore, increased clarity is required.► In many cases, assignees will be working in the host location under work authorization — increasing onus on the th employer t remain compliant t prevent negative l to i li t to t ti immigration consequences.► The high compensation cost of the assignees means that mistakes may become very costly.► Addressing employment law considerations in advance and ensuring documentation is in place saves the company time compared to resolving issues later. p y p gPage 5 Managing the legal minefield
  6. 6. Global mobility: basic law matters Legal aspects on cross-border movement of employees Rules for applicable employment law Between EU members: Between an EU member and all other Rom-I-Convention countries/between all other countries: bilateral/international contracts regarding conflict of laws Rules for relevant court of jurisdiction Between EU members: Council Between an EU member and all other Regulation (EC) No 44/2001 of countries/between all other countries: 22 December 2000 on jurisdiction and bilateral/international contracts the recognition and enforcement of regarding conflict of laws judgments in civil and commercial matters (“Brussels I”)Page 6 Managing the legal minefield
  7. 7. Global mobility: basic law matters Correlation between immigration/work authorization/employment law in the host location — no one-size-fits-all for different countries Who is the employer? Immigration regulation Different legal rules apply, requires specific structure and that determines the of the employment p y immigration means. relationships (e.g., necessary host country employment contract).Page 7 Managing the legal minefield
  8. 8. Employment law issues throughout the lifecycle: secondment agreements► Within Cargill’s p g g program, an initial determination is , undertaken to determine whether an assignee will generate a host tax liability; this then determines whether: ► A secondment agreement is put in place Or ► A service agreement► Typically, such agreements will determine the allocation of costs for the assignment and also protect against permanent establishment risks: ► Such agreements are not directly shared with the assignee. ► What are the potential employment law considerations and legal status of such agreements?Page 8 Managing the legal minefield
  9. 9. Employment law issues throughout the lifecycle: secondment agreements► Clarification of the legal terms: g ► What is the definition and the content of the secondment agreement? ► What is the content of the service agreement?► Potential employment law considerations and legal status: ► Which law is applicable? ► Who is the employer of the assignee? ► Who has the right of direction?: ► Which authorization is granted to the assignee? ► Differentiation from temporary employment work ► Violation of immigration regulationsPage 9 Managing the legal minefield
  10. 10. Employment law issues throughout the lifecycle: assignment letters► At the outset of an assignment, the assignee is p g , g provided with a letter of assignment, which sets out the terms of their impending assignment.► Typically such agreements would outline broad terms relating to their new role, assignment allowances and repatriation. t i ti► What is the legal status of an assignment letter?► What Wh t if an existing employment contract is in conflict with i ti l t t ti i fli t ith terms of the assignment letter?► Does the assignment letter create employment rights?► Is the assignment letter the most appropriate document to address data privacy or intellectual property matters?Page 10 Managing the legal minefield
  11. 11. Employment law issues throughout the lifecycle: assignment letters► What is the content of the letter of assignment, which sets g , out the terms of the assignment?► Is it only descriptive to document a common y p understanding about the assignment in general without any legally binding effect?► With legally binding effect: ► Is it an amendment of the existing employment contract? ► Is it a separate contract — who are the parties; who is the employer? ► Are there any regulations about prevailing terms and conditions? ► Which law is applicable? ppPage 11 Managing the legal minefield
  12. 12. Employment law issues throughout the lifecycle: assignment policies► Most companies should have a set of p p policies to p provide consistency and guidance for the provision of assignment benefits and allowances.► One problem that we have encountered historically is the agreement of exceptions to the policy either locally or directly ith line di tl with a li manager — such exceptions are not h ti t always well tracked or documented.► What is the best practice to avoid future problems in such situations?► What is the legal status of an assignment policy?► Does the policy have to be shared with employees or accessible in any way?Page 12 Managing the legal minefield
  13. 13. Employment law issues throughout the lifecycle: assignment policies► Depending on the applicable law on the assignment p g pp g relationship/employment contract, conditions of the policies might not be valid/enforceable in different jurisdictions.► A practical issue is to avoid/track exceptions► Legal status of an assignment policy: ► Is part of the contractual assignment relationship — therefore, the policy has to be shared with employees or accessible in any way way. ► Is a collective regulation — possible rights of employee representation bodies have to be observed (e.g., co-determination right of Works Councils in Germany).Page 13 Managing the legal minefield
  14. 14. Employment law issues throughout the lifecycle: provision of local benefits► Many countries legally mandate minimum levels of y g y benefits be provided to employees, for instance, vacation entitlements, 13th-month pay, meal tickets, etc.► Within most assignments, the assignee will normally remain subject to home-country benefits and remain in receipt of these. i t f th► How can the company “equalize” or “neutralize” these additional entitlements?► Can a letter of assignment or home country employment contract take precedence over local benefits rules?Page 14 Managing the legal minefield
  15. 15. Employment law issues throughout the lifecycle: provision of local benefits Differentiation between local benefits based on: l lb fit b d Individual (contractual) entitlement, equal treatment ( ) Local collective regulations Local mandatory and/or public law regulations y p g If the assignee remains subject to home-country benefits, a setting-off clause regarding home-country benefits may di h t b fit “equalize” or “neutralize” these additional entitlements. In I general a letter of assignment or home- l l tt f i t h country employment contract cannot take precedence over local benefit rules.Page 15 Managing the legal minefield
  16. 16. Employment law issues throughout the lifecycle: repatriation considerations► The repatriation p p process is an extremely critical stage in y g any assignment and if mishandled can lead to disgruntled employees.► Repatriation considerations may include: ► How should the host employment relationship be ended? ► What promises can or should the employer be making to employees during this process? ► What requirements exist with respect to the position or role the assignee will be returning to?► In certain circumstances, the cessation of the host employment relationship may create an entitlement for the employee to receive a severance payment. Can the home employer seek reimbursement of such payments?Page 16 Managing the legal minefield
  17. 17. Employment law issues throughout the lifecycle: repatriation considerations► Termination of the host employment relationship depends on the applicable law.► Requirements with respect to the position or role of the assignee after returning are in general depending on the home-country employment relationship and/or additional agreements.► When the cessation of the host employment relationship creates an entitlement for the employee to receive a severance p y payment, in case the home-country employment relationship y p y p continues, a special clause in the home-country employment contract might help so that the home-country employer can seek reimbursement of such payments payments.Page 17 Managing the legal minefield
  18. 18. Employment law issues throughout the lifecycle: termination of assignees► Recent economic circumstances have led many y companies to consider the positions of all employees, including those on assignment.► Termination of assignees can be a complex matter because multiple jurisdictions are involved and there is the th complexity of employees b i away f l it f l being from th i h their home location.► Can assignees receive additional employment protection due to their assignments or assignment location?► What are the essential steps to achieving a successful termination of assignees?► Would regular notice periods apply?Page 18 Managing the legal minefield
  19. 19. European employment laws: protections inredundancies► What to consider before and during redundancy g y Information and Involvement consultation of the of an existing European Works supervisory Directive Directive Council/local works board 2009/38/EC 2005/56/EC councils Directive Di ti Comply with local 98/59/EEC procedure required in case of collective redundanciesPage 19 Managing the legal minefield
  20. 20. Key issues in redundancies: Summary Costs Timing g ► Understand compensation ► Phased or blow out and benefits packages of approach different employee ► Start together/finish populations Manage local together ► Harmonization design ► Factor in risks of delay and costs regulatory l t ► Controlling the timeline ► Calculation of termination compliance costs and tax optimization Key to manage: ► Costs ► Timing ► Works councils/ Implementation Works councils/ unions management unions ► Manage the intricacies ► Key in Europe ► Implementation of multiple players (works councils, unions, ► Drive and control the labor authorities, process employees, courts) ► Must do prior to implementation i l t ti ► Must have game plan before you start ► Documentation is key ► Significant potential impact ► Documentation is key on timeline and costs ► Manage litigation risksPage 20 Managing the legal minefield
  21. 21. Employment law issues throughout the lifecycle: repatriation considerations ► Termination of assignees is a complex matter because multiple jurisdictions are involved and the local requirements for termination are different. ► Additional employment protection due to assignments or assignment location as well as the applicable notice period depends on the applicable law. ► Essential steps to achieve a successful termination of assignees: ► Determine what i agreed i the contracts regarding ( l ) D i h is d in h di (early) termination ► Determine which law is applicable, and what the specific pp , p requirements for termination are ► Involve local counsel to take the right actionPage 21 Managing the legal minefield
  22. 22. Employment law issues throughout the lifecycle: post assignment considerations► Generally during the course of an assignment, tax y g g , equalization policies or their equivalent can determine many questions relating to an assignee’s personal tax obligations.► However, a number of countries have favorable or concessional l i l local t t t l tax treatment when an i di id l may t h individual have spent a certain period of time outside that location.► It is not always possible to address this within a policy or framework. What is a good rule of thumb for dealing with such conflicts?► How can such conflicts be resolved without reverting to legal action? gPage 22 Managing the legal minefield
  23. 23. Employment law issues throughout the lifecycle: post assignment considerations When tax equalization applies during assignment and countries have favorable or concessional l i l local tax treatment, a special clause f b l i l l for benefits resulting f fi l i from such favorable tax treatment should be agreed on with the assignee individually, regulating the details and the extent. Ideas from a practical point of view, to be reviewed under applicable law Possible assignment Agreement on Necessary legal of the claims of the withholding or claw- action in cases assignee against th i i t the back clauses where the contract is local tax authorities regarding other terminated and the to the employer benefits or former assignee contractual fines refuses to cooperatePage 23 Managing the legal minefield
  24. 24. Employment law issues throughout the lifecycle: tracking assignee payments► Following the end of an assignment, there are a number of g g , reasons assignees may continue to have amounts owed to the company: ► Tax T equalization b l li ti balances ► Unused foreign tax credit carryforwards ► Future claims of right ► Host-country tax refunds► Most assignees who remain employees will abide by existing policies and reimburse amounts owed.► What legal recourse or challenges exist with obtaining payments from former employees if they refuse? t f f l th f ?► What course of action should companies follow to obtain reimbursement?Page 24 Managing the legal minefield
  25. 25. Employment law issues throughout the lifecycle: tracking assignee payments► Legal challenges for obtaining p y g g g payments from former employees if they refuse: ► Where does the employee live today? p y y ► Where is the right place of venue? ► Which law is applicable? ► Is any preliminary legal protection possible? ► Are the regulations/policies enforceable under the applicable law? ► How long might court procedures take? ► In case I get a favorable court judgment, how can I enforce the judgment? Do I need an authentication of another country because the former employee lives now in another country?Page 25 Managing the legal minefield
  26. 26. Employment law issues throughout the lifecycle: localization► It is becoming a more common trend at Cargill and other g g companies to localize assignees either when they have been on assignment for a number of years or directly from their home to the new host location.► A localization represents a movement of employers and in most cases a termination or resignation of the home- t t i ti i ti f th h country employment relationship — this has an impact on the employee s benefits retirement provisions social employee’s benefits, provisions, security, etc.► What is the best practice in dealing with such localizations.Page 26 Managing the legal minefield
  27. 27. Employment law issues throughout the lifecycle: localization As localization also represents a movement of different social security systems and (local) benefits, each change has an impact on the employees benefits, retirement provisions, social security, etc. Trends in dealing with such localizations Local employment A balance on thecontracts agreed loss of local Most critical: different Groupwide for a fixed term, term benefits, which statutory pension benefit plans not unlimited depends on the entitlements, possibly individual situation balanced by global and should be pension schemes agreed individually g yPage 27 Managing the legal minefield
  28. 28. QuestionsPage 28 Managing the legal minefield

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