Canadian Employment Law Today

Canadian Employment Law Today | 3 Canadian HR Reporter, a Thomson Reuters business 2014 Cases and Trends Avoiding a long, costly journey Know all the rules before terminating an expat By JuLiE LEssArd eXPATrIATIOn COnTrACTs have be- come a complex legal issue, with a wide ar- ray of contract types that vary based on an employer's internal policies and on contract jurisdiction. From "local-to-local," "local- to-expat," "expat-to-local" and traditional long- and short-term expat contracts, the tripartite relationship between a foreign employer, local employer and expatriating employee can become difficult to under- stand and to manage. In the event of an expat termination, em- ployers could be exposed to civil liability in more than one jurisdiction, sometimes involving substantial monetary compensa- tion to the terminated expat — which is of- ten completely unforeseen and unbudgeted by employers. It's important to understand the potential dangers and identify ways to minimize risks when terminating an expat. To illustrate the complexity of such a termination, reference is often made to the L'Oréal decision (Cass. soc. 13 nov. 2008, no 07-41700, Bull. civ. V, no 214) where a French national was initially hired in France as a salaried employee of L'Oréal S.A. for the successive roles of assistant (since Decem- ber 1998) and assistant/logistics for the Asia market (since September 2000). As of March 2002, the employee agreed, in a written document, to end her employ- ment contract with L'Oréal S.A. in order to accept employment with L'Oréal China, a subsidiary of L'Oréal S.A. under a local contract for the role of project manager/ operations; a position she was to occupy as of Oct. 1, 2002. In September 2002, she disclosed her pregnancy to L'Oréal SA and L'Oréal China. ree weeks after she failed to report to her new office in Shanghai on Oct. 1, L'Oréal China said her employment contract was null and void following her complete disre- gard of the engagement. e expat turned back to L'Oréal S.A., which refused to rehire her, citing a written agreement that clearly stipulated the end of employment with the parent company when taking up employ- ment with a foreign subsidiary. e case was brought to court in France and L'Oréal S.A. was found liable of a viola- tion of the French labour code when termi- nating the employee and ordered to rehire the woman in a role similar to the one she held before termination. e ruling was pronounced by the local chamber of the French Cour de Cassation, France's supreme court. What is most in- teresting case is that despite the written agreement between the parties, the court applied a larger legal protection overruling the termination of an employment contract even in the presence of appearing mutual consent. e court held that L'Oréal was in breach of the labour code, which states: "Whereas a salaried employee hired by the parent company was furnished to a for- eign affiliate and where a labour contract was concluded with the latter, the parent company ensures his repatriation in a case of termination by the affiliate, and procures him a new employment comparable in im- portance to his previous role within the parent company. "Notwithstanding the parent company's intent to terminate this salaried employee, the provisions of the present paragraph are in force. "e time spent by the salaried employee working at the affiliate is therefore taken into consideration when calculating the time for notice and indemnity payments connected to termination." In sum, under French labour code, if the home employer refuses to repatriate the expat and terminates her employment with the home unit, the employee will be subject to substantial monetary compensation. ere have been a number of situations where a French salaried employee was sent temporarily to a Canadian subsidiary of his French employer, but signed a local Cana- dian labour contract. In this case, strictly speaking, no expatriation occurred as the only contract executed was a local Canadian (or Quebec) contract. However, in an event of termination of this local contract in Canada, where less stringent rules respecting the termination of salaried employees with less than two years of seniority are applied, French expa- triates have filed complaints in France and were able to obtain compensation from the French company to indemnify their prema- ture terminations. Local laws often prevail ere is more than the wording of an expa- triation contract or local contract that may lead to employer liability. While the nature and type of contract still are of prime impor- tance, the law applicable to the contract as well as local laws superior to all employment contracts are just as important. When pre- paring an expatriation contract, an employ- er must, therefore, be mindful of the larger legal context both in the home country and the receiving country. For instance, in standard long-term expat situations, employers often include provi- sions stipulating the home country laws will apply in a case of a dispute, waiving the ap- plicability of all local laws. However, such waiver provisions are often inapplicable, especially in the European Union where lo- cal labour laws are crafted to offer extended protection to workers. Moreover, in most countries, even where the applicability of foreign law would be recognized, local regulations that are of a mandatory or "public order" nature will ap- ply nonetheless. In Canada, for instance, no employer can be exempt from minimum wage, working hours or vacation time regulations — even in the presence of a mutually agreed expat contract stipulating incompatible terms. Temporary workers under a local contract would also benefit from the same protection as local workers with respect to termina- tion, up to the expiration of the work permit. In a case of termination, as s. 124 of the Act Respecting Labour Standards in Que- bec is deemed to protect public order, it would likely represent an available recourse to a terminated expat even if the expat con- tract stipulates a waiver of local laws. For home-base employers, clearly identi- fying and understanding the applicable law is especially important where expats tend to become savvy about local regulations. In- deed, either through the execution of their functions abroad — which often include hir- ing, compensation and termination of local employees — or through their interaction with labour and immigration authorities and other expats, modern global workers are often better informed than their home employer when it comes to their rights in the hosting country. A failure to correctly identify the appli- cable laws in this context can also lead to the danger of double indemnity. As an illustra- tion, labour laws in Mexico apply the doc- trine of "immediacy," which roughly means an employer must terminate an employee for misconduct within one month of being informed of said cause for termination. A failure to do so could result in wrong- ful termination, giving ground to monetary compensation payable in Mexico. Such compensation could be added to any con- tractual compensation or liability due in vir- tue of the home country regulations. While awkward situations arising from similar provisions can easily be prevented by expe- rienced, local HR managers in the destina- tion country, if the contract is managed by the home country, the risk is higher. hoMe CouNtrY on page 7 »

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