Tag: at-will employment

Global Employment Contracts: The Modern Tower of Babel

Although multi-jurisdictional compliance is a challenge in relation to every aspect of employment law, the structure of employment contracts and the enforcement of global policies require particularly careful consideration.

The need to coordinate individual country compliance across numerous countries whilst still maintaining a common company culture requires extensive knowledge of national laws and considerable flexibility.

Contracts

US-based businesses will be used to working with at-will offer letters, but these are mostly unheard of elsewhere. In most jurisdictions, detailed employment contracts are not only customary, but are required by law. As you would expect, companies must ensure the legal compliance of their contractual documentation for each country in which they do business. This includes engagement letters, employment offers, employment contracts, bonus schemes, stock option plans, etc.

With employment contracts, the most common approach is to prepare a contract compliant with local law in accordance with best practices in the jurisdiction where the individual is to be employed. Contracts should incorporate crucial terms, such as probationary periods, termination grounds, working time provisions, and post-termination non-compete and/or non-solicitation provisions.

  • Countries have varying rules on the maximum duration of a probationary period. For example, France permits an eight-month probationary period, one renewal included, for executives under an indefinite-term contract (contrat à durée indéterminée); whereas a 90-day probationary period is standard in the United States.
  • Subject to applicable statutory restrictions in each country, termination provisions provide a good starting point to enforce the departure of an employee, for example in case of a violation of company policies, such as a code of conduct.
  • In France, where the legal working time is 35 hours per week, there is the option of entering into flat-rate pay agreements for autonomous executives whose roles and responsibilities do not permit alignment with the collective working time/office schedule. In the United Kingdom, there exist more flexible, zero-hours contracts, under which the employer is not obliged to provide any minimum working hours but, equally, the employee has no obligation to accept the work offered.
  • The rules on post-termination provisions, such as confidentiality, non-compete and non-solicitation restrictions, vary significantly. Some jurisdictions follow a reasonableness approach (Australia, the United Arab Emirates, and the United Kingdom); others have outright prohibitions (India, Mexico, and Russia); and others mandate compensation for non-compete clauses (China, France, and Germany).

With so many nuances country-by-country, contract drafters often consider choice of law and jurisdiction clauses. Public policy considerations may, however, override such clauses. For an Italian citizen hired in Italy to work in Italy, it will be difficult to apply Australian law merely because the employer is an Australian corporation. The general rule is that the laws of an employee’s physical worksite will likely apply, regardless of such clauses.

The relevant law for all European Union countries is the Rome I Regulation. Under Rome I, foreign employees in Europe benefit from the mandatory laws of the country with which they have the closest connection, which will usually be the country where they normally work. Accordingly, a German employee working in France should receive a French law-governed employment contract, even if the employee works for a UK employing entity.

For highly mobile employees, however, the place of work is often debatable. For instance, English employment courts have decided that an employee working remotely in Australia has the right to bring an unfair dismissal claim in the United Kingdom if the work is done for a UK employer, regardless of the employee’s physical worksite.

Forum-selection provisions that call for a forum other than the place of employment tend to be unenforceable outside the United States. In London, US expatriates working under contracts with such clauses who sue before an English Employment Tribunal are unlikely to see their claim dismissed when their employer invokes the forum-selection clause.

In choice-of-forum situations, Europeans invoke the provisions of the “Recast Brussels Regulation.” These codify the general rule that employees rarely have to litigate employment disputes outside their host country place of employment, even if a choice-of-foreign-forum clause purports to require otherwise.

Communicating Global Policies

Every organisation has bespoke policies, employee handbooks, and a code of conduct. In addition, every organisation has its own HR practices, such as evaluation processes and training programmes, all dictated by the corporate culture and even corporate vocabulary. It can be challenging to extend those across borders and the legal systems of different countries.

In France, policies related to safety, disciplinary procedures, harassment, whistleblowing, etc., particularly if the policy provides sanctions, must be incorporated within internal rules (règlement intérieur), which must be filed with the employment court and inspectorate. If a company fails to file its policies correctly, it may not be able to discipline employees for violating the rules.

Country by country, companies must consider the interrelationship between the contract and the applicable policies. In some jurisdictions, it is advisable to incorporate relevant handbook policies into the contract. In the United Kingdom, for example, it is compulsory to mention disciplinary and grievances procedures in the contract.

Language Barriers

Where the policies are written is, however, merely the beginning. How they are written is much more complicated. Communicating clearly in multiple languages is now a core HR function for global entities. Many jurisdictions, such as Belgium, France, and Poland, require contracts to be in the local language, even for an employee fluent in the primary language used by the employer. If the contract is not in the local language, its provisions, the policies, and other elements, will be unenforceable, at least for the employer.

A typical example is a global bonus plan, where a failure by the employer to translate the target objectives can allow the employee to claim a bonus without needing to comply with the terms of the plan (i.e., without achieving the stated goals or objectives). This has been confirmed by French case law.

In some countries, such as Turkey, the local language will always prevail, regardless of what is provided for in the contract. In those cases, ensuring translation accuracy can avoid inadvertently granting employees more generous terms under a local translation than the company intended.

Local language translations are also required for other purposes. For instance, in Spain the employment contract needs to be filed with the government, in Spanish. In other countries, such as China, works councils and unions will need to be consulted on the implementation of policies, and submissions for those consultations will need to be in the local language.

As a result, businesses now often consider whether to create employment documents in the local language only, or in two languages. If a document is used that has two columns showing the corporate language and the local language, it is crucial to state which language prevails.

© 2019 McDermott Will & Emery

For more on employment law, see the Labor & Employment law page on the National Law Review.

Breaking news: Continued employment is lawful consideration in Wisconsin

On April 30th,  the Wisconsin Supreme Court ruled that continued at-will employment constitutes lawful consideration to support an otherwise reasonably drafted restrictive covenant agreement signed by a current employee. No additional monetary payments or other consideration is necessary. As employers in Wisconsin are aware, this is an issue that previously was wrought with uncertainty. A copy of the Court’s decision is available here.

This case was successfully argued by Godfrey & Kahn, S.C. and represents a big win for employers.

In the underlying case, Runzheimer International v. Friedlen, the Circuit Court held that an employer’s offer of continued employment to support a noncompete agreement with an employee was “illusory” and thus invalidated the agreement. Recognizing that this issue has not been squarely addressed in Wisconsin and citing potentially conflicting case law, the Court of Appeals certified the case to the Supreme Court on the narrow issue of whether “consideration in addition to continued employment [is] required to support a covenant not to compete entered into by an existing at-will employee.”

Currently the states are split as to whether continued employment alone will support a restrictive covenant. The Court pointed out that the states that do not find continued employment to form sufficient consideration are in the “distinct minority.” In siding with the majority, the Court held that an employer’s promise to continue to employ an at-will employee is lawful consideration in Wisconsin. In reaching its decision, the Court emphasized that:

(1) An employer’s promise of continued at-will employment will create lawful consideration only when employer is truly exercising forbearance with respect to its right to terminate employment. In other words, employers must be prepared to then and there terminate a current employee who refuses to sign a restrictive covenant agreement; and

(2) Employers may not misrepresent their intention to continue to employ the employee. An agreement signed by an employee who is terminated by the employer shortly thereafter could constitute a breach and make the agreement unenforceable. The Court emphasized that employees are protected by traditional contract formation principals such as fraudulent inducement and the covenant of good faith and fair dealing.

In making these points, the Court clarified and explained past precedent. The Court stated that it was of no consequence that the duration of the continued employment was not specified in the agreement. The Court emphasized that with respect to contract formation, the consideration analysis is limited to the existence of “lawful consideration,” not its adequacy. On these and other points, the Court provided additional analysis and guidance that is helpful to employers and will be covered in a client alert coming shortly.

While this is not a green light to require all current employees to sign a noncompete, employers now have certainty that, in particular circumstances, otherwise reasonably drafted restrictive covenant agreements signed by current employees will not be invalidated solely on the basis of consideration.

Originally posted in the All in a Day’s Work Blog April 30, 2015 By Rebeca M. López and Margaret R. Kurlinski

Copyright © 2015 Godfrey & Kahn S.C.

Another Court Rejects Notion that Restrictive Covenant Agreements Must be Supported by At Least Two Years of At-Will Employment

Godfrey & Kahn S.C. Law firm

In a recent decision addressing the enforceability of a restrictive covenant agreement under Illinois law, the court in Bankers Life and Casualty Co. v. Miller, 2015 U.S. Dist. LEXIS 14337 (N.D. Ill. 2/6/15), ruled that Illinois law did not require a minimum of two years of employment to support the employee’s restrictive covenant obligations.  The court rejected the employee’s argument that the “bright-line” rule created by the Illinois Appellate Court in Fifield v. Premier Dealer Services, Inc.required at least two years of continued employment to justify enforcement of the non-competition restrictions.

The Bankers court ruled that “the competition restrictions were not invalid for lack of consideration as a matter of law on the basis that the departing employees’ tenure was less than two years[.]”  Instead, the court ruled that each non-competition restriction should be assessed on a case-by-case basis.  The Bankers ruling is in line with a prior Northern District of Illinois decision, Montel Aetnastak, Inc. v. Miessen, in which the court (by a different judge) ruled that 15 months of continued employment was sufficient consideration to support a non-competition restriction.  In Montel, the employee voluntarily resigned his employment.

In Illinois state courts, however, employers have not had such good luck.  The Illinois Appellate Court in Prairie Rheumatology Associates, S.C. v. Francis recently reiterated the two-year rule created in Fifield.

For employers, the difference in the treatment of Illinois restrictive covenant agreements emphasizes the importance of beating the employee to the courthouse.  In other words, if an employee files a declaratory action in state court, the odds are that the court will follow the Fifield rule.  If, on the other hand, the employer files first in federal court, the odds favor the employer.

Yet another case, Instant Technology, LLC v. Defazio, 2014 U.S. Dist. LEXIS 61232 (N.D. Ill. May 2, 2014), is pending in the Seventh Circuit Court of Appeals.  We will monitor this case and follow up once a ruling is issued.

ARTICLE BY

Rufino Gaytán
Deborah Rehorst
OF
Godfrey & Kahn S.C.

NLRB Chills At-Will Acknowledgements of Social Media in Employee Handbooks

The National Law Review recently published an article about the NLRB’s Social Media Rulings written by Jerrold J. Wohlgemuth of  Drinker Biddle & Reath LLP:

 

 

Having warned employers about the legality of their social media policies under theNational Labor Relations Act, NLRB Acting General Counsel Lafe Solomon has apparently turned his attention to at-will employment statements in employer handbooks and manuals.  Employers of union and non-union workforces need to pay careful attention to this development.

Many employers use standard language in their handbooks and manuals in which their employees acknowledge that their employment is at-will; that the employer may terminate the employment relationship at any time, for any reason; and that the at-will employment relationship cannot be amended, altered or modified except by a writing signed by a senior member of management.  The Acting General Counsel apparently believes that such at-will disclaimers may interfere with or chill the right of employees to engage in protected concerted activity.

In a case that did not receive extensive publicity, the General Counsel’s Office filed an unfair labor practice charge in February 2012 against Hyatt Hotels (NLRB v. Hyatt Hotels Corp., Case 28 CA-061114) in which it alleged that the at-will disclaimer in the company’s employee handbook violated Section 8(a)(1) of the Act to the extent it required employees to acknowledge that their at-will employment status could not be altered except by a writing signed by management.  The charge appears to reflect the Acting General Counsel’s belief that such an acknowledgement will have a chilling effect on the Section 7 right of employees to engage in concerted activity for the purpose of organizing to alter their employment relationship with the employer by choosing union representation.  The Hyatt case was settled before the issue was presented for a hearing.  An Administrative Law Judge issued a similar ruling in a case decided in early February against the American Red Cross; the case was resolved when the Red Cross agreed to modify its at-will disclaimer before the issue could be presented to the Board for review. (NLRB v. Am. Red Cross, 2012 WL 311334, Feb 1, 2012).

This is an important initiative on the part of the Acting General Counsel.  As we have seen in the social media context, in analyzing handbooks and policy manuals the Acting General Counsel will apply Section 7 broadly to find statements unlawful to the extent they could be interpreted in almost any fashion to chill employee rights to engage in protected concerted activity.  Accordingly, employers may want to take proactive steps to avoid NLRB scrutiny by including a disclaimer in the at-will sections of their handbooks to the effect that the at-will acknowledgment does not, and is not intended to, undermine or interfere with the employee’s right to engage in protected concerted organizing activity under Section 7 of the Act.

©2012 Drinker Biddle & Reath LLP