International Mobility: General legal principles and issues in Belgium

Stefan NerinckxAttorney, PartnerEmployment & Benefits, BrusselsProfessor of Employment law, University-College Brussels

6 October 2011

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Programme• Introduction• Avoiding the 3 pitfalls in employment mobility legislation

• Step1: determine the applicable law• Employment law

• Immigration law

• Social security law

• Step 2: analyses of the law

• Step 3: application of the law

• Belgium and other jurisdictions

Employment Law Aspects of Expatriation

Clauses

Repatriation/relocation12

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Employment conditions/ benefits and compensation6

Termination of employment11Contract – agreement 5

Health and safety10Employee/self-employed4

Homogeneous application/Non-discrimination 9Social security3

Consent EE/ER2

Cost control7Immigration1

Employment Law Aspects of Expatriation

1 Contract - agreement

2 Clauses

5 Immigration

3 Employment conditions/and compensation

4 Termination of employment

6 Social security

United States of Europe?

United States of Europe?

Your 3 Steps to Avoiding Pitfalls:

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What judge is competent?What law is applicable?

Application of the law (and optimize the contractual relationship)

Step 1:

Step 2:

Step 3:

Analyze the applicable law• Conflicting?

• Practice + case law• Special issues?

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Step 1: What Judge is competent?• Some international treaties:

– Treaty of Lugano, etc

– EU Regulation n°44/2001• EU Member States except Denmark

• Principles

• Internal legislation International Private Law of the state where the case is brought to court

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Step 1: What Law is Applicable?• Treaty of Rome (June 19, 1980)

• Treaty of Amsterdam (1997)

• Directive 96/71/EC of the European Parliament and of the Councilof 16 December 1996 concerning the posting of workers in the framework of the provision of services

• Rome I (European Regulation 593/2008 of June 17, 2008): replaces the Treaty of Rome (June 19,1980)

• Rome II (European Regulation 864/2007 of July 11, 2007)

• Legislation being applicable extra-territorially

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Step 1: What Law is Applicable?• Transfer: the employee is

– sent abroad – and the employment relationship with the initial employer is suspended or

terminated– the employee gets a brand new contract with the host employer

• Secondment: The employee is (inbound)– sent by his original employer for a short or a long period to another

jurisdiction/ country– either to a group company or to perform duties under a specific assignment– the employee remains bound to the original employer for the entire period

• Simultaneous employment: the employee– works in two or more countries at the same time, for one or more employers – the employment relationship is governed by one contract of employment (1

employer); separate temporary contracts of employment or one global contract (two or more employers).

H a b i t u a l

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Step 1: What Law is Applicable? Inbound

permanent(transfer)

temporary(secondment)

simultaneous(salary split)

Overriding mandatory provisions EU companies Third country companies

Rome II

H a b i t u a lER place

CHOICE OF LAW

Closer link

NEWNEW

Court:

Habitual

permanent(transfer)

temporary(secondment)

simultaneous(salary split)

Overriding mandatory provisions EU companies Third country companies

Rome II

H a b i t u al ER place

CHOICE OF LAW

Closer link

NEWNEW

H a b i t u a

Court:

Habitual

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Step 1: What Law is Applicable? Outbound

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Step 1: What Law is Applicable?• Example:

– Convention on the law applicable to contractual obligations of June 19, 1980 (the Rome Convention) - Antwerp Labour Court, 19 November 2001

• Ascertain which court has jurisdiction;

• Contract of employment signed after January 1, 1988

• No choice of applicable law

• Article 6(2)(a) – art. 8(2)(a)

• Article 6(2)(b) – art. 8(2)(b)

• Article 7(1) – art. 9(2)

• Article 7(2) – art. 9(3)

• Article 16 – art. 21

– Other extra territorial legislation?

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Step 1: What Law is Applicable? • Notification (e.g. Belgium - LIMOSA)• Immigration law

– Internal legislation (examples on French, Belgian legislation)

– What is the status on economic migration in the European Union and the European Economic Area

­ Free movement of workers

­ Secondment/services ECJ - C-43/93 Vanderelst of 9 August 1994

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Step 1: What Law is Applicable? • European Blue card – EU Directive 2009/50

– European citizenship

– Single permit – EU Directive (proposal) 2010/638

– ICT: EU Directive (proposal) 2010/378

– Seasonal workers: EU Directive (proposal) 2010/379

US Green cardPermanent residenceValid for 10 years renewableAllows holders and families to live and travel in the USFive channels to obtain a card: employment, family , lottery, investment, resident before 1972Holders can become US citizens after 5 years

EU Blue cardDoes not give permanent residenceValid up to two years renewableAllows holders and families to live, work and travel in the EUApplicant must present

a diplomaproof of at least 3 years experienceone year contract with 3 times the minimum salary

Permanent residence after 5 years

Step 1: What Law is Applicable?

Yes

Treaty or not?

Analyses of the regulations in Treaty or Regulation

No

Lex loci laborisOne regime or multiple regimes

Social security law

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Step 1: What Law is Applicable? • Social security law

– Internal legislation (lex loci laboris)– Bilateral treaties– Multilateral Treaties/EU Regulation

– EU Regulation 883/2004 and 987/2009­ To whom applicable? Third country nationals?­ What coverage?­ Transitional measures

– Relation between the treaties versus the EU regulations

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Step 1: What Law is Applicable? • Social security law (new in the EU regulations)

Simultaneous employment (art. 13 EU 883/2004)Not temporaryNot marginal (new 5% rule) activities

examplesSubstantial activities (new 25% rule)

examplesState of residence State where the employer is situated

Notification in the state of residence

Secondment (art. 12 EU 883/2004)Prior submission home countryOccasional and temporaryDirect link with home Cy (illustration)

Hiring

Employment agreement

Salary

Termination

Sanctions

Nature of activities

No employment contract (no tri-partite) with host CySecondment articles are compulsorySuccessive secondments = new secondments

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Step 2: Analyze the Applicable Law

Choice of Law

Overriding Mandatory Provisions

Int. Ordre Public

Extra-Territoriality ???

Step 3: Application of the law• Contract is individual document linking the employee and the

employer, so important for

– Risk management• legal security and optimisation of the chosen, agreed clauses – more

legal security in respect of application and enforceability

• consistent interpretation of contract by different parties

• prevention of disagreements and limitation of legal claims

• compliance with (local) legislation, enforceability of the clauses agreed upon

– HR processes• Seamless interaction between policy and contract, if applicable

• General, consistent guidelines for local management

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Step 3: General • Jurisdiction

• Applicable law

• Contractual structure

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Step 3: General • Contractual structure

– Nature of the contract is determined on the basis of the scenario in respect of international mobility

– ROME I! Particular attention must be paid to the choice of applicable law and the consequences thereof when drawing up the secondment agreement

– Beware of duality of employment relations/employers (concept of employer)

– General terms and conditions of employment• Directive 91/533/EC

­ Period of employment abroad;

­ Currency in which the salary is paid;

­ Any extra benefits;

­ Where appropriate, the terms and conditions of return.

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Step 3: General • “Depeçage”

– Notion of employer

– Payroll structure

– Obligatory mention in the contract

– Changes in the employment contract (place of work, etc.)

– Non-compete

– Dismissal

– Remuneration, bonus and taxes - LTI, share and option plans

– Indirect immigration and social security

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Step 3: Particular clauses• Place of employment and recall

– The parties have considered the place of employment as a non essential element of the contract of employment; the clause that entitles the employer to change the place of employment is valid;

– The terms and conditions of the employee’s recall to the seconding country during the posting: include clause that the employer can (unilaterally) put an end to the international employment at any time (even if the initially agreed term has not yet expired)

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Step 3: Particular clauses• Salary

– Contractual • Stipulating that the employee will be temporarily employed under better

working and pay conditions and that, upon the termination of thesecondment, at least the original terms and conditions of his/her contractof employment will again be applicable and resumed (though limited thereto)

– What salary must be taken into consideration for• calculating, in particular, the minimum pay and pay indexations (Court of

Justice of the European Communities);

• payroll structure

• calculating all kinds of benefits;

­ for the calculation of severance, the real salary must be taken into account and not the fictitious one calculated for tax purposes

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Step 3: Particular clauses• Salary (cont.)

– “Post-adjustment premiums”: in concrete terms, ascertaining the compensation for extra costs actually incurred by the employee

• Hardship allowance: part of current pay

• Cost-of-living allowance (COLA): Belgium: not part of salary, if loss of purchasing power (not from USA to Europe)

• Housing allowance: same principle, but case law in Belgium is stricter and takes account of whether or not the residence in the country of origin is retained; if not, no cost

• Tax equalisation: the Belgian case law is very divided

• Schooling allowance

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Step 3: Particular clauses• Salary (cont.)

– Tip: • The employee accepts and recognizes that an allowance constitutes an

extra cost – otherwise, he or she must point it out to the employer + evidence

• Mention explicitly in the agreement that post-adjustment premiums are not taken into account in calculating the salary for severance pay or other such purposes

­ Reference can be made to case law on pseudo self-employed

• No tax equalisation on severance pay (in contract)

– Exchange rate

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Step 3: Particular clauses

• Language legislation

– Language restrictions in many countries

– Belgium:

• Flanders, Wallonia, Brussels

• For posting/place of business

• Option plans

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Step 3: Particular clauses• Statutory holiday (pay) legislation

– Convention on the law applicable to contractual obligations of 19 June 1980 and ROME I

– Directive 96/71

– Belgium:

– Applicable law and social security• EU Regulation 883/2004 (1408/71)

• Bilateral treaties on social security

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Step 3: Particular clauses• Social security

– Pay attention in drawing up the posting agreement (also for the purposes of social security).

• Cf. secondment and social security?

• Residence

• Social security provision

• Supplementary insurance/additional insurances

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Step 3: Particular clauses• Taxation

– Mobility clause

– Special tax regimes for foreign executives• Taxation

• Social security

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Step 3: Particular clauses

• Health and Safety– Coordination

– Responsibility

– Preventive measures

– Unilateral action

– Mandatory rules

– Belgium : art. 7 & 9 of the Act of 4 August 1996

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Step 3: Particular clauses• Dismissal

– Define dismissal procedures (under the original contract of employment) during the international employment

• In most countries, dismissal legislation belongs to the mandatory rules

• Specific, separate terms and conditions for termination of the contract of employment and the secondment agreement

• Limitation of notice/severance by special clause

– Grave misdemeanour/serious cause• Content may be different

• Belgium:

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Step 3: Particular clauses• Dismissal

– For the calculation of severance, the real salary must be taken into account and not the fictitious one calculated for tax purposes

– Salary components (see remark slide 26)

• Salary

• Flexible salary/bonus

• Hardship premium

• COLA

• Housing allowance (home-country housing – permanent secondment)

• Tax equalisation

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Step 3: Particular clauses• Non compete and non-poaching clause

– Samengo-Turner versus J&H Marsh Mc Lennan Ltd

– Duarte versus Black & Decker

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Step 3: Particular clauses• Competent Judge/Applicable law clause

– Competent judge clause

– Applicable law clause

– Arbitration clause • European Convention on Human Rights

• European Court on Human Rights

THANK YOU!

Stefan NerinckxAttorney – Partner

Professor Employment lawUniversity-College Brussels

Tel: +32 (0) 477 61 81 71stefan.nerinckx@ffw.com

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