You will need to clearly understand the visa requirements and associated limitations in each case. Where the assignment entails a family move, it will also be important to consider whether visas will be readily available for accompanying family members. It will also be important to consider whether the home and host countries have reciprocal social security agreements and/or double tax treaties which will impact the deductions and state benefits the individual will be entitled to receive. This may have a bearing on the employee's willingness to relocate and/or financial package which is ultimately offered to him/her.
Accurate documentation recording the nature of the arrangement will be critical for immigration and tax purposes. Immigration authorities will invariably require this documentation when assessing whether the application meets the requirements of the particular kind of visa which is being sought. In some circumstances, additional documentation may need to be drawn up specifically for immigration purposes. For example, in some cities in China, the immigration authorities often require a short-form document setting out the key assignment terms and conditions. This document, although seemingly innocuous, can cause problems for employers particularly in an acrimonious termination situation, as employees can seek to rely on it to support claims of dual employment. Although there may not necessarily be a means to entirely avoid these situations or risks, it is important to be aware of potential areas of risk in the future.
Which country's employment laws will apply? It may be that more than one country's laws will apply at the same time. For example, where a UK-based employee is sent on a temporary assignment to Hong Kong, the parties may decide that English law will continue to apply for the duration of the assignment. However, mandatory Hong Kong employment laws (e.g. relating to termination and notice, minimum wage, annual leave entitlements) will also apply to the relationship. Although Hong Kong is generally considered to be an employer-friendly jurisdiction, there are some quirks in the employment legislation which could have some serious, unintended consequences – for example, employees in Hong Kong have a statutory right to terminate their employment by making a payment in lieu of notice. This may leave the business in an unforeseen and vulnerable situation where key senior personnel with access to highly sensitive information are able to walk out without providing any notice to the employer at all. If the individual is being assigned to an unfamiliar jurisdiction, it is critical to have at least a basic understanding of the employment law framework so that similar local legal quirks can be anticipated and mitigated in advance.
In reality, the point at which an assignment or employment comes to an end is when employees are most likely to seek to argue that they are entitled to protections under host country laws – perhaps because local employment laws make it more difficult to terminate employment, or entitle employees to significantly higher amounts of severance pay.
Termination of the Assignment/ Employment
An employer can encounter difficulty where it intends to terminate the assignment and underlying employment contract. Simply following the termination provisions in the assignment letter will not necessarily bring the underlying employment contract to an end. In terminating both arrangements, the employer will likely need to have regard to both home and host country employment laws – what constitutes valid grounds for termination in one country may render a dismissal void in another, and severance or other termination payments will also need to be accounted for, having regard to statutory requirements, company or sector-wide collective bargaining agreements, and the company's custom and practice.
Where the host country's employment laws are particularly onerous and difficult to navigate, one option may be for the employer to first bring the assignment to an end and repatriate the individual to the home country, and to then terminate the underlying employment contract in accordance with home country laws once the individual has returned home. This may help to ensure that the connection with the host country is severed. Also, in practical terms, an employee may be less likely to bring a claim in the host country if he/she is no longer based and residing there.
Often, a significant amount of resource is invested in scoping, transferring and managing and employee's transition to another part of the world. It is not uncommon for employers to include generous relocation allowances, cost of living allowances and repatriation benefits as part of an expat package. Where an employee voluntarily resigns during the assignment, it can leave the employer in a vulnerable and unfortunate position.
Assignment letters will often make provision for the clawback of certain payments (e.g. relocation, airfare and temporary housing costs) in the event that the assignee terminates his/her employment within a certain period from commencement of employment. This is often done as a form of guarantee and to ensure that the business will get a minimum period of service in exchange for all of the upfront costs that it is agreeing to cover. However, under English law (and generally, the laws of many other common law jurisdictions), these types of clawback, while potentially effective as a deterrent, may be unenforceable if they are deemed by the courts to be a penalty clause – that is, a clause which requires payment from an employee in connection with a breach of contract, which imposes a detriment on the employee which is out of all proportion to the employer's legitimate interest. It is therefore worth carefully considering and drafting such provisions as enforceability is likely to be increased where the repayment amount is tapered and pro-rated in line with the employee's period of service on assignment. Onerous repayment terms may also amount to an unenforceable restraint of trade where their effort is to deter an individual from leaving.
If the individual is critical to your organisation and has access to sensitive confidential information, consider how best to address and protect the business' legitimate interests and whether existing post-termination restrictions will need to be varied or replaced. The law surrounding post-termination restrictions differs significantly between countries and regions and it is impossible to draft a "one size fits all" set of obligations. In the context of an international assignment, this can be particularly problematic.
In some countries, non-compete provisions are void entirely for policy reasons (e.g. Malaysia and India), and so it will be important to seek to protect confidential information in other ways, which are compliant with local laws and practice. In other countries, non-competes may be enforceable, but they come at a cost - for example, a requirement to pay 60% of the employee's base salary for the duration of the restraint period, without the possibility of unilateral waiver by the employer. While there is a basic level of commonality across the EU with the EU Trade Secrets Directive 2016/943, implementing laws and the technical rules around post-termination restraints can vary significantly. The table highlights some key differences across a selection of EU jurisdictions
It may be necessary to consider the laws in both home and host country in order to devise a strategy which best protects the business. This will unfortunately not be as simple as creating two sets of post-termination restraints, each compliant with home and host country's laws respectively, as this can potentially render both sets void for uncertainty. Where possible, it is sensible to try to comply with both sets of laws and adopt the approach which is the least restrictive to the employee. For example, if there is a maximum restraint period under the host country's laws which is shorter than the existing employment contract's restraint period, the shorter period should ideally be adopted in order to increase the likelihood of enforceability.
3. Prepare and finalise assignment documents.
Documentation will be critical when it comes to unpicking the knotty issues which can arise in an assignment. An assignment letter will be required, setting out the terms and conditions which will be varied for the duration of the assignment. There is also usually an agreement between the assignee and the host entity, dealing with confidential information and intellectual property obligations. Finally, an inter-company agreement is also usually drafted to deal with commercial issues such as recharging of employment costs or payment of fees for services provided.
When drafting and finalising the relevant documentation, it is important to consider whether there are any local language translation requirements and whether local language will prevail in the event of any inconsistency.
To ensure consistency, regard should also be had to any global or local assignment policies which set out the business position in relation to relocation, repatriation, expatriate allowances and benefits. The assignment letter should reference the relevant policies (if any), although if the intention is for the policy to be non-contractual to allow flexibility for amendment in the future, this should be made clear in both the assignment letter and the policy document.
International assignments will inevitably carry risks and uncertainties. Employers should carefully consider these risks and uncertainties and balance them against benefits to the business and to employees before going ahead.
Assignment documentation will typically be more technically complex than that required for an ordinary 'home-based' employee. After careful collaboration with the relevant experts, documentation which accurately records the arrangement between the parties should be drawn up. This will be key to avoiding disputes or claims in the future, and will help give the employee comfort that the employer has carefully thought everything through, before embarking on a new journey.