Tips for hiring employees across the globe

Employment laws are dramatically different around the world, and human resources practices do not necessarily transfer seamlessly from one location to another. Companies looking to succeed in expanding operations to other locations need to keep this in mind and seek employment law advice specific to each location in which they intend to do business. Here is some general guidance to keep in mind when growing your business across borders.

Is an employment agreement useful in this jurisdiction?

While some jurisdictions do not require employment agreements, they are an absolute necessity in others. As an example, most employees in the US can have their employment terminated at will without notice, severance or other compensation being required. Other countries however, such as Canada and the EU countries, require employers to provide terminated employees with reasonable notice of termination, severance or some other form of compensation in order to provide the employee with a period of pay while seeking new employment. Determining what that amount will be is not always straightforward, but having a proper employment agreement signed by the parties at the start of the employment relationship can help to clarify the amount in advance, and save the employer from uncertainty at best and litigation at worst.

What statutory protections are in place?

Many countries have legislation which sets out requirements for things like overtime entitlements, vacation entitlements, leaves of absence and minimum wage. As one might imagine, there is a great disparity between countries when it comes to the specifics of those entitlements. In addition, while statutory entitlements can vary from country to country, they can even vary within a country. In Canada, for example, the province of Ontario has a unique organ donor leave and the province of New Brunswick has a court leave. Some jurisdictions have reservist leave, bereavement leave, and compassionate care leave. Likewise, the vacation norm in the US for non-government employees is just two-to-three weeks of paid vacation per year (although there is no mandatory requirement), while the statutory requirement in England is a whopping 28 days.

If a company tries to take its statutory employment practices from one country to another without regard to the applicable statutory requirements, it risks breaking the law, not to mention angering its foreign workforce.

Which restrictive covenants are enforceable?

Many companies desire restrictive covenants such as non-solicitation or non-competition agreements and most companies try to protect their intellectual property through the use of confidential information and intellectual property agreements. What is enforceable in one jurisdiction however, will not necessarily fly in another. For example, non-competition agreements tend to draw the ire of the courts in California, although not all US states react the same way. Likewise, Canadian intellectual property agreements can contain a waiver of moral rights provision (allowing the employer who has been assigned the intellectual property to take over rights to the integrity of the intellectual property), but similar US agreements often do not contain such a provision.

Which laws will apply to which employees and contractors?

If you are a US-based company hiring a few employees in Canada, it may be tempting to just put them onto your template form of employment agreement for US employees. The problem with that approach is that they will be seen to be Canadian employees under Canadian law if they are working in Canada and are not independent contractors. As Canadian employees, they will be entitled to all of the statutory entitlements and other entitlements (like proper notice and/or severance on termination) which Canadian laws provide and if your US form of employment agreement does not address those entitlements, it will be invalid and struck down by the Canadian courts. Likewise, an American with a human rights claim against his or her non-US employer is not going to be precluded from bringing that claim in the US just because he or she is subject to a non-US form of employment agreement. Although jurisdictional issues can be complicated, the general rule is that you are employed in the jurisdiction in which you provide services. As a result, it is important for employers to ensure that their employees are governed by employment agreements and policies which reference applicable local laws.

Even if individuals are being hired as independent contractors or consultants rather than employees, there are rules and laws in each country which set out differing tests as to whether or not an individual is properly classified as a contractor.

Questions? Email us at startups@dentons.com.