This presentation considers why it's important to consider employment law issues and employment law throughout the assignment life cycle including: ► Transfer of personnel — use and status of secondment agreements ► Assignment letters ► Assignment policies ► Provision of local benefits to assignees ► Repatriation considerations ► Termination of assignees during the assignment ► Post-assignment considerations ► Tracking of amounts owed to the company ► Localizations

1. 2012 Human Capital Conference
23–26 October
Managing the legal minefield

2. Disclaimer
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Ernst & Young Global Limited, each of which is a separate legal entity.
Ernst & Young LLP is a client-serving member firm of Ernst & Young
Global Limited located in the US.
► This presentation is ©2012 Ernst & Young LLP. All rights reserved. No
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► The views expressed by panelists in this session are not necessarily
those of Ernst & Young LLP LLP.
Page 2 Managing the legal minefield

3. Presenters
► Jos Griffioen ► Roselyn S. Sands
y
► Cargill Inc. ► Ernst & Young Société
► jos_griffioen@cargill.com d'Avocats
► roselyn.sands@ey-
► Dr. Karsten Umnuss avocats.com
► Ernst & Yo ng La GmbH
Young Law
► karsten.umnuss@de.ey.com
Page 3 Managing the legal minefield

4. Agenda
► Introductions
► Why it is important to consider employment law issues
► Employment law throughout the assignment life cycle:
► Transfer of personnel — use and status of secondment agreements
p g
► Assignment letters
► Assignment policies
► Provision of local benefits to assignees
► Repatriation considerations
► Termination of assignees during the assignment
► Post-assignment considerations
► Tracking of amounts owed to the company
► Localizations
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5. Global mobility: why employment law
matters
► Cross-border movement of employees means that
p y
multiple jurisdictions’ laws could apply; therefore,
increased clarity is required.
► In many cases, assignees will be working in the host
location under work authorization — increasing onus on
the
th employer t remain compliant t prevent negative
l to i li t to t ti
immigration consequences.
► The high compensation cost of the assignees means that
mistakes may become very costly.
► Addressing employment law considerations in advance
and ensuring documentation is in place saves the
company time compared to resolving issues later.
p y p g
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6. Global mobility: basic law matters
Legal aspects on cross-border movement of employees
Rules for applicable employment law
Between EU members: Between an EU member and all other
Rom-I-Convention countries/between all other countries:
bilateral/international contracts regarding
conflict of laws
Rules for relevant court of jurisdiction
Between EU members: Council Between an EU member and all other
Regulation (EC) No 44/2001 of countries/between all other countries:
22 December 2000 on jurisdiction and bilateral/international contracts
the recognition and enforcement of regarding conflict of laws
judgments in civil and commercial
matters (“Brussels I”)
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7. Global mobility: basic law matters
Correlation between immigration/work authorization/employment law
in the host location — no one-size-fits-all for different countries
Who is the employer? Immigration regulation
Different legal rules apply, requires specific structure
and that determines the of the employment
p y
immigration means. relationships (e.g.,
necessary host country
employment contract).
Page 7 Managing the legal minefield

8. Employment law issues throughout the life
cycle: secondment agreements
► Within Cargill’s p g
g program, an initial determination is
,
undertaken to determine whether an assignee will
generate a host tax liability; this then determines whether:
► A secondment agreement is put in place
Or
► A service agreement
► Typically, such agreements will determine the allocation of
costs for the assignment and also protect against
permanent establishment risks:
► Such agreements are not directly shared with the assignee.
► What are the potential employment law considerations and legal
status of such agreements?
Page 8 Managing the legal minefield

9. Employment law issues throughout the life
cycle: secondment agreements
► Clarification of the legal terms:
g
► What is the definition and the content of the secondment
agreement?
► What is the content of the service agreement?
► Potential employment law considerations and legal status:
► Which law is applicable?
► Who is the employer of the assignee?
► Who has the right of direction?:
► Which authorization is granted to the assignee?
► Differentiation from temporary employment work
► Violation of immigration regulations
Page 9 Managing the legal minefield

10. Employment law issues throughout the life
cycle: assignment letters
► At the outset of an assignment, the assignee is p
g , g provided
with a letter of assignment, which sets out the terms of
their impending assignment.
► Typically such agreements would outline broad terms
relating to their new role, assignment allowances and
repatriation.
t i ti
► What is the legal status of an assignment letter?
► What
Wh t if an existing employment contract is in conflict with
i ti l t t ti i fli t ith
terms of the assignment letter?
► Does the assignment letter create employment rights?
► Is the assignment letter the most appropriate document to
address data privacy or intellectual property matters?
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11. Employment law issues throughout the life
cycle: assignment letters
► What is the content of the letter of assignment, which sets
g ,
out the terms of the assignment?
► Is it only descriptive to document a common
y p
understanding about the assignment in general without
any legally binding effect?
► With legally binding effect:
► Is it an amendment of the existing employment contract?
► Is it a separate contract — who are the parties; who is the
employer?
► Are there any regulations about prevailing terms and
conditions?
► Which law is applicable?
pp
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12. Employment law issues throughout the life
cycle: assignment policies
► Most companies should have a set of p
p policies to p
provide
consistency and guidance for the provision of assignment
benefits and allowances.
► One problem that we have encountered historically is the
agreement of exceptions to the policy either locally or
directly ith line
di tl with a li manager — such exceptions are not
h ti t
always well tracked or documented.
► What is the best practice to avoid future problems in such
situations?
► What is the legal status of an assignment policy?
► Does the policy have to be shared with employees or
accessible in any way?
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13. Employment law issues throughout the life
cycle: assignment policies
► Depending on the applicable law on the assignment
p g pp g
relationship/employment contract, conditions of the
policies might not be valid/enforceable in different
jurisdictions.
► A practical issue is to avoid/track exceptions
► Legal status of an assignment policy:
► Is part of the contractual assignment relationship — therefore, the
policy has to be shared with employees or accessible in any way
way.
► Is a collective regulation — possible rights of employee
representation bodies have to be observed (e.g., co-determination
right of Works Councils in Germany).
Page 13 Managing the legal minefield

14. Employment law issues throughout the life
cycle: provision of local benefits
► Many countries legally mandate minimum levels of
y g y
benefits be provided to employees, for instance, vacation
entitlements, 13th-month pay, meal tickets, etc.
► Within most assignments, the assignee will normally
remain subject to home-country benefits and remain in
receipt of these.
i t f th
► How can the company “equalize” or “neutralize” these
additional entitlements?
► Can a letter of assignment or home country employment
contract take precedence over local benefits rules?
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15. Employment law issues throughout the life
cycle: provision of local benefits
Differentiation between
local benefits based on:
l lb fit b d
Individual (contractual) entitlement, equal treatment
( )
Local collective regulations
Local mandatory and/or public law regulations
y p g
If the assignee remains subject to
home-country benefits, a setting-off clause
regarding home-country benefits may
di h t b fit
“equalize” or “neutralize” these additional
entitlements.
In
I general a letter of assignment or home-
l l tt f i t h
country employment contract cannot take
precedence over local benefit rules.
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16. Employment law issues throughout the life
cycle: repatriation considerations
► The repatriation p
p process is an extremely critical stage in
y g
any assignment and if mishandled can lead to disgruntled
employees.
► Repatriation considerations may include:
► How should the host employment relationship be ended?
► What promises can or should the employer be making to
employees during this process?
► What requirements exist with respect to the position or role the
assignee will be returning to?
► In certain circumstances, the cessation of the host
employment relationship may create an entitlement for the
employee to receive a severance payment. Can the home
employer seek reimbursement of such payments?
Page 16 Managing the legal minefield

17. Employment law issues throughout the life
cycle: repatriation considerations
► Termination of the host employment relationship depends on the
applicable law.
► Requirements with respect to the position or role of the assignee
after returning are in general depending on the home-country
employment relationship and/or additional agreements.
► When the cessation of the host employment relationship creates
an entitlement for the employee to receive a severance
p y
payment, in case the home-country employment relationship
y p y p
continues, a special clause in the home-country employment
contract might help so that the home-country employer can seek
reimbursement of such payments
payments.
Page 17 Managing the legal minefield

18. Employment law issues throughout the life
cycle: termination of assignees
► Recent economic circumstances have led many y
companies to consider the positions of all employees,
including those on assignment.
► Termination of assignees can be a complex matter
because multiple jurisdictions are involved and there is
the
th complexity of employees b i away f
l it f l being from th i h
their home
location.
► Can assignees receive additional employment protection
due to their assignments or assignment location?
► What are the essential steps to achieving a successful
termination of assignees?
► Would regular notice periods apply?
Page 18 Managing the legal minefield

19. European employment laws: protections in
redundancies
► What to consider before and during redundancy
g y
Information and Involvement
consultation of the of an existing
European Works supervisory
Directive Directive
Council/local works board
2009/38/EC 2005/56/EC
councils
Directive
Di ti
Comply with local 98/59/EEC
procedure required in case
of collective redundancies
Page 19 Managing the legal minefield

20. Key issues in redundancies: Summary
Costs Timing
g
► Understand compensation ► Phased or blow out
and benefits packages of approach
different employee ► Start together/finish
populations Manage local together
► Harmonization design ► Factor in risks of delay
and costs regulatory
l t
► Controlling the timeline
► Calculation of termination compliance
costs and tax optimization
Key to manage:
► Costs
► Timing
► Works councils/ Implementation
Works councils/
unions management unions ► Manage the intricacies
► Key in Europe ► Implementation of multiple players
(works councils, unions,
► Drive and control the
labor authorities,
process
employees, courts)
► Must do prior to
implementation
i l t ti ► Must have game plan
before you start
► Documentation is key
► Significant potential impact ► Documentation is key
on timeline and costs ► Manage litigation risks
Page 20 Managing the legal minefield

21. Employment law issues throughout the life
cycle: repatriation considerations
► Termination of assignees is a complex matter because
multiple jurisdictions are involved and the local requirements
for termination are different.
► Additional employment protection due to assignments or
assignment location as well as the applicable notice period
depends on the applicable law.
► Essential steps to achieve a successful termination of
assignees:
► Determine what i agreed i the contracts regarding ( l )
D i h is d in h di (early)
termination
► Determine which law is applicable, and what the specific
pp , p
requirements for termination are
► Involve local counsel to take the right action
Page 21 Managing the legal minefield

22. Employment law issues throughout the life
cycle: post assignment considerations
► Generally during the course of an assignment, tax
y g g ,
equalization policies or their equivalent can determine
many questions relating to an assignee’s personal tax
obligations.
► However, a number of countries have favorable or
concessional l
i l local t t t
l tax treatment when an i di id l may
t h individual
have spent a certain period of time outside that location.
► It is not always possible to address this within a policy or
framework. What is a good rule of thumb for dealing with
such conflicts?
► How can such conflicts be resolved without reverting to
legal action?
g
Page 22 Managing the legal minefield

23. Employment law issues throughout the life
cycle: post assignment considerations
When tax equalization applies during assignment and countries have favorable
or concessional l
i l local tax treatment, a special clause f b
l i l l for benefits resulting f
fi l i from
such favorable tax treatment should be agreed on with the assignee
individually, regulating the details and the extent.
Ideas from a practical point of view, to be reviewed under
applicable law
Possible assignment Agreement on Necessary legal
of the claims of the withholding or claw- action in cases
assignee against th
i i t the back clauses where the contract is
local tax authorities regarding other terminated and the
to the employer benefits or former assignee
contractual fines refuses to cooperate
Page 23 Managing the legal minefield

24. Employment law issues throughout the life
cycle: tracking assignee payments
► Following the end of an assignment, there are a number of
g g ,
reasons assignees may continue to have amounts owed to the
company:
► Tax
T equalization b l
li ti balances
► Unused foreign tax credit carryforwards
► Future claims of right
► Host-country tax refunds
► Most assignees who remain employees will abide by existing
policies and reimburse amounts owed.
► What legal recourse or challenges exist with obtaining
payments from former employees if they refuse?
t f f l th f ?
► What course of action should companies follow to obtain
reimbursement?
Page 24 Managing the legal minefield

25. Employment law issues throughout the life
cycle: tracking assignee payments
► Legal challenges for obtaining p y
g g g payments from former
employees if they refuse:
► Where does the employee live today?
p y y
► Where is the right place of venue?
► Which law is applicable?
► Is any preliminary legal protection possible?
► Are the regulations/policies enforceable under the applicable law?
► How long might court procedures take?
► In case I get a favorable court judgment, how can I enforce the
judgment? Do I need an authentication of another country because
the former employee lives now in another country?
Page 25 Managing the legal minefield

26. Employment law issues throughout the life
cycle: localization
► It is becoming a more common trend at Cargill and other
g g
companies to localize assignees either when they have
been on assignment for a number of years or directly from
their home to the new host location.
► A localization represents a movement of employers and in
most cases a termination or resignation of the home-
t t i ti i ti f th h
country employment relationship — this has an impact on
the employee s benefits retirement provisions social
employee’s benefits, provisions,
security, etc.
► What is the best practice in dealing with such
localizations.
Page 26 Managing the legal minefield

27. Employment law issues throughout the life
cycle: localization
As localization also represents a movement of different social security
systems and (local) benefits, each change has an impact on the
employees benefits, retirement provisions, social security, etc.
Trends in dealing with such localizations
Local
employment A balance on the
contracts agreed loss of local Most critical: different Groupwide
for a fixed term,
term benefits, which statutory pension benefit plans
not unlimited depends on the entitlements, possibly
individual situation balanced by global
and should be pension schemes
agreed individually
g y
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28. Questions
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