How to Determine Which Jurisdiction's Employment Laws Reach Border-Crossing Staff

By Dowling, Donald C., Jr. | Labor Law Journal, Spring 2016 | Go to article overview

How to Determine Which Jurisdiction's Employment Laws Reach Border-Crossing Staff


Dowling, Donald C., Jr., Labor Law Journal


The most fundamental question in cross-border employment law practice is inevitably: Which country's employment laws reach border-crossing staff like expatriates, mobile workers and employees with international territories? And then there is the related question: To what extent is a choice-of-law provision enforceable when it appears in an employment agreement, expatriate assignment letter, employee benefits program or compensation plan? These two questions implicate employee "forum shopping," and employees who can "forum shop" wield "powerful ammunition in negotiations over compensation."1

Both of these questions arise frequently. They get asked (or, certainly, should get asked) whenever a multinational employer structures a mobile job, an expatriate posting, an overseas "secondment" or just an international business trip. The questions come up when a multinational drafts cross-border employment policies and international benefits or equity plans. They come up with cross-border restrictive covenants and employee intellectual property assignments. These questions even arise when an employer contracts with overseas independent contractors, because of the risk of misclassification. And these questions become vital when an employer needs to dismiss border-crossing staff like expatriates, international secondees, mobile workers and personnel with international territories.

The complete answer to these questions is, at the same time, both simple and complex. A simple general rule applies most of the time, but that general rule is subject to nuances, refinements, strategies, exceptions and purported exceptions. To respond to these questions thoroughly requires an analysis of three topics: (1) the general rule as to whose laws reach border-crossing employees (2) refinements to the general rule and (3) the effect of a choice-of-law or choice-of-forum-clause.

Part 1: The General Rule as to Which Jurisdiction's Employment Laws Reach Border-Crossing Staff

The U.S. Army used to run a ship repair center in Hampshire, England, on the English Channel. But back in 2006, "for strategic reasons" the Army shut the shipyard down. In closing it, the Army sidestepped a British labor law that prohibits layoffs of 20 or more workers within 90 days unless the employer first "consult[s]" or negotiates "about the dismissals" with the staff, even if they are not unionized.2 When an English accountant named Mrs. Nolan sued the Army for laying her off without consulting first, the Army fought back, arguing UK labor law does not reach an overseas U.S. Army shipyard engaged in activities that are jure imperii, not jure gestionis - and besides, in the international public-sector context UK and European Union labor laws are ultra vires.3 The case went on for nine years and all the way up to the UK Supreme Court. In October 2015 the Supreme Court issued a 45page opinion that upheld for Mrs. Nolan the simple rule that UK labor laws apply on UK soil: Generally, employee protection laws are territorial to the place of employment.

When determining which jurisdiction's laws apply in a cross-border employment scenario, always begin with the general rule that employee protection laws are territorial to the place of employment. The local employee protection laws of the place where a given employee currently works usually apply by force of public policy as "mandatory rules." The corollary or logical inverse of this rule is that employee protection laws of all jurisdictions other than the current place of employment - even the place of an employee's citizenship, the place of hire or the place of the employer's headquarters - generally do not apply in overseas jurisdictions (unless expressly drawn in by an agreement between the parties).

This general rule and its corollary make sense when we understand their underlying policy. Employee protection laws tend to be strands in the legal safety net that each jurisdiction unfurls to protect staff working within its territorial borders. …

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