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By Yin Wilczek
Jan. 6 — As U.S. corporations increasingly look overseas for business, they must deal with a basic human resource issue—how to impose and implement rules for employees located around the world, an attorney said Jan. 6.
Although there are some U.S. laws with extraterritorial application that must be enforced globally, such as the Foreign Corrupt Practices Act and U.S. trade sanctions, U.S. multinational corporations also must be wary of the myriad legal and other issues within the different jurisdictions in which they operate, said Donald Dowling Jr., a New York-based K&L Gates LLP partner.
At the same time, multinational corporations—to avoid pitfalls—should take into account nine factors in globally rolling out their rules and codes of conduct, Dowling said. He spoke at a Practising Law Institute webinar on drafting and implementing global codes of conduct.
Dowling said there are four tools through which multinational organizations may communicate their employee rules:
• standalone HR policies that apply only to the local jurisdictions or that mix global policies with local requirements;
• employee handbooks—either a global handbook or a U.S. handbook combined with one handbook or different handbooks for the other jurisdictions;
• global codes of conduct; or
• individual employment contracts that are aligned globally, but that take into account local legal requirements.
Which tool or combination a company uses to package and communicate its rules is a business decision that is driven by the company's specific requirements and circumstances rather than by legal requirements, Dowling said.
In deciding which rules should be global and which local, the U.S. Supreme Court's 2010 decision in Morrison v. Australia National Bank Ltd., 561 U.S. 247, 2010 BL 14233 confirmed that U.S. federal laws do not apply extraterritorially unless Congress expressly indicated that they do, Dowling noted. Accordingly, although it is critical for companies to have a global FCPA policy, 99 percent of U.S. legal requirements don't apply overseas, he said.
Dowling also noted that there are some structural impediments to crafting a global policy or rule, including that the U.S. and Nigeria are the only two employment-at-will countries in the world. The rest of the world utilizes an “indefinite employment” approach in which local mandates can vastly differ from U.S. requirements, he warned. Dowling noted, for example, that some foreign jurisdictions require detailed individual employment contracts, while others have local language laws.
Moreover, Dowling suggested that companies should not post policies on their intranets without stating the countries to which they apply. He noted, for example, that an innocent non-smoking policy can lead to confusion for employees who work in countries in which the activity is legal.
Dowling said that topics that are very suited to a global policy include:
• bribery or improper payments,
• electronic communications and
• regional sales commission plans.
Topics that are less appropriate for a global policy include:
• holidays and vacation times,
• dress codes,
• disciplinary/termination procedures,
• health or retirement benefits and
• data protection compliance.
Meanwhile, in launching a code of conduct or rules, companies should take nine steps to ensure the new requirements are enforceable in the different jurisdictions, the attorney said. They should:
(1) Consider how many versions of the code of conduct they want, such as a single global version or different policies applicable to the U.S. and the rest of the world.
(2) Repeal obsolete documents, and harmonize and/or align the new code with local HR policies and requirements.
(3) Consider their corporate structures—if they and their subsidiaries are organized as separate entities, the new requirements will not bind the subsidiaries' employees unless the subsidiaries ratify and implement the requirements.
(4) Consult unions, work councils, health and safety committees and other local groups that may be entitled, under local law, to expound on the requirements.
(5) Check to see if translation into the local language is necessary, as is mandated in Belgium, Iraq, Quebec and Turkey.
(6) Check local regulations regarding the communication, distribution and acknowledgement of the new policies. Dowling warned that companies, when outside the employment-at-will context, must take into account what he described as the “Achilles heel” situation of employees who refuse to sign the acknowledgement stating they have received the policy. “You can't force them to sign it and it's not good cause” for termination if they refuse, he said.
(7) Check local mandates to see if government filing is required.
(8) If the new code materially changes or reduces vested employment terms or conditions, check if that violates local employment or labor laws.
(9) If companies have an existing code of conduct on their intranets, they should ensure the requirements are properly implemented and deficiencies fixed so that their “existing suite of global HR policies apply worldwide,” Dowling said.
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The Morrison decision is available at http://www.bloomberglaw.com/public/document/Morrison_v_Natl_Australia_Bank_Ltd_130_S_Ct_2869_177_L_Ed_2d_535_.
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