Which law applies to my expat?
Thanks to MetLife’s extensive experience serving multinational companies, the MetLife Expatriate Business unit has seen all types of expatriate assignments. Some of our clients will send their expats on one international assignment and then have them return to their home countries; whereas others will have their expats go from one international assignment to the next. Some of the expats will be nationals of the home countries; whereas other will be Third Country Nationals. The examples, and the possibilities, are virtually endless.
What all these assignments have in common due to their international nature is the fact that in the event of a legal dispute more than one law may be applicable.
Let’s illustrate this point with an example:
Max works for a record label headquartered in New York (MusicCo). His employment agreement includes a 1 year post-termination non-compete subject to NY law. After 1 year he is promoted to VP for Europe and he is sent to the company’s EMEA headquarters in London. He spends 3 years working in London after which he is promoted to Head of Asia and sent to Hong Kong. After 6 months in Hong Kong, Max is offered a job with a direct competitor based in Singapore. Max accepts the competitor’s offer and moves to Singapore. If MusicCo decides to file a claim to enforce the non-compete, which law would be applicable to this situation? New York law? UK law? Hong Kong law? Singapore law? The law of the court where the claim is filed?
These types of questions are obviously complicated and their resolution will depend on the facts and the specific court analyzing such facts. However, based on our experience, applicable international laws and regulations, and existing case law there are some best practices and lessons learned that might be of interest:
- As a general principle, most of the obligations under the employment laws of the country where an expatriate is assigned will usually apply independently of the existence of a choice of law clause (i.e., a clause by which the parties agree to subject the employment relationship to the laws of a given state/country) by force of public policy or because local law considers that they cannot be derogated by a private agreement between the parties (such as a choice of law clause included in an employment agreement).
This tendency to apply local employment law even if the parties have expressed their wish for another law to control will make more sense if we provide a reverse example in which a foreign employee is sent to work to the US. Imagine this employee is sent to work to Detroit for two years under an employment contract governed by Pakistani law. The employer would not be able to pay this employee Pakistani minimum wage in the event is lower than minimum wage in the US. US law would prevail over Pakistani law and require the employer to pay at least US minimum wage.
- The above general principle might not apply when dealing with issues not usually covered by local employment laws such as non-mandatory benefits: stock options, private medical insurance, etc.
- Including a choice of law clause stating that the governing law is the law from a state/country different to the country where the expat is assigned might provide the expat the opportunity to “cherry pick” between the two sets of laws (i.e., between the host country law and the law selected in the choice of law clause).
Consequently, employers should be wary of (i) including a choice of law clause in the expat assignment documents by which the relationship with the expat is governed by a law different than the law of the assignment place, and (ii) keeping the expat during the assignment under a home country employment agreement that refers to home country law. There are, however, certain exceptions (e.g., when the assignment is very short) that we will cover in one of our next issues.
This article is provided by MetLife for educational and informational purposes only and is not intended and should not be construed as legal advice. It should not be acted upon in any specific situation without appropriate legal advice. MetLife makes no undertaking to advise recipients of any legal changes or developments.
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