Global HR Hot Top - September 2012: Employment-Context Choice-of-Law Clauses

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Challenge:

Multinationals often insert choice-of-law clauses (usually calling for home country law) into cross-border employment agreements. But more often than not these clauses backfire, forcing the employer to comply with the extra rules of an additional legal regime.

In our last Global HR Hot Topic (August), on “Whose Laws Reach Border-Crossing Employees?,” we discussed the general rule that employment protection laws of the place of employment apply even notwithstanding a choice-of-law clause by which parties to an employment (or employee compensation) agreement purport to select the law of some foreign jurisdiction with a nexus to the employment. When a border-crossing employee selects the law of some jurisdiction outside the host country — even a jurisdiction with a genuine nexus to the employment —the selection is usually powerless to block host country “mandatory rules.” And in the employment context, host-country “mandatory rules” include most regulation of the workplace, such as for example laws relating to: pay rate, overtime, payroll, mandatory benefits, hours, rest periods, vacation/holidays, health/safety, labor unions/collective representation, discrimination/harassment/“moral” abuse, employee-versus-contractor classification, restrictive covenant/non compete/trade secret rules and dismissals—firing procedure, notice, severance pay and releases.

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