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While campaigning for President in 1932, Franklin Roosevelt promised a crowd in Pittsburgh that he’d balance the federal budget while cutting “government operations” by 25 per cent. When he returned to Pittsburgh during his 1936 campaign, Roosevelt asked his staff how to answer questions about that unfulfilled promise and was told “deny you were ever in Pittsburgh.”

So much has changed since then: what is said and done is now instantly visible. This lesson came earlier to politicians, it is now unavoidable for business entities. There is no option to deny that you were there.

Let’s look at some consequences of this global visibility:

  • El Super, a small California-based grocery chain with approximately 600 unionized workers, failed to resolve a routine labor dispute at one store with the union representing those employees. As a result of this dispute involving just one store, El Super’s Mexican parent company, Chedraui Commercial Group, found itself subject to double barrel complaints filed by US and Mexican labor unions under the North American Free Trade Agreement labor agreement and Organization for Economic Cooperation and Development guidelines.
  • Vedanta found itself subject to a lawsuit by individuals living more than 5,000 miles away when an appellate court in the United Kingdom held that farmers from a Zambian village could bring a claim against Vedanta and its Zambian subsidiary (Lungowe and Ors. v Vedanta Resources PLC and Konkola Copper Mines PLC [November 2017] EWCA Civ 1528). The court’s decision expanded the potential “duty of care” that parent companies have under UK law to employees of their subsidiaries, to include even non-employees who might be affected by its subsidiaries’ operation.

This trend is particularly apparent with respect to issues of forced labor. Eight of the G20 countries (Australia, Brazil, China, France, Germany, Italy, Britain, and the United States) have passed, or taken steps to pass, anti-slavery laws intended to minimize the impact of forced labor. The UK Modern Slavery Act is a prime example.

These “nudge laws” require companies to disclose what actions they have taken to ensure there is no forced labor in their businesses or within their supply chains. The idea is that large companies that have not taken actions to prevent forced labor become subject to public scorn or shaming.

The risk, however, goes far beyond adverse publicity, as the following challenges demonstrate.

  • Barber v Nestlé USA alleged violations by Nestlé USA of California’s Transparency in Supply Chains Act, asserting a failure to disclose that some of the fish used by Nestlé in its cat food products may have been caught by fishing boats in Thailand that use forced labor and sold their catch to Nestlé’s partner, Thai Union Frozen Products, PCL. Nestlé ultimately won in both the trial and appellate courts.
  • Tomasella v. Mars, Inc., raised similar claims, alleging violations by Hershey Co., Nestlé USA Inc., and Mars, Inc., of the Massachusetts’ Consumer Protection Act by failing to disclose on the packaging their “participation in supply chains making use of the worst forms of child labor” despite having “knowledge of the child and slave labor in its supply chain.” The federal court judge dismissed the claims against Hershey, Nestlé, and Mars.
  • Samsung Global and its French subsidiary, Samsung Electronics France, have been challenged by nongovernment organizations (NGOs) in France for alleged misleading advertising. For example, the NGOs claim that Samsung’s website publishes ethical commitments guaranteeing workers’ rights, while its factories in China, South Korea, and Vietnam allegedly violate human rights, including engaging in child exploitation. After a Paris prosecutor closed the investigation, the NGOs filed a civil complaint against Samsung’s French subsidiary, which has led the Paris investigating magistrate to file preliminary charges against Samsung Electronics France.
  • Doe v. Nestlé is a suit under the US Alien Tort Claims Act in which Nestlé and Cargill have been accused of aiding and abetting child slave labor in the Ivory Coast. Most recently, the US Ninth Circuit Court of Appeals reversed the dismissal of these claims and allowed the plaintiffs to amend their complaint to “specify which potentially liable party is responsible for what culpable conduct.

Historically, businesses, like Franklin Roosevelt in 1932, focused narrowly on geography. Back then, what was said or done in Pittsburgh was only heard or witnessed in Pittsburgh. Today, what is done in Pittsburgh may matter in Paris, Prague, and Phnom Penh, and vice versa. As a result, companies must pay attention to employment practices along their entire global supply chain.

This article was originally publish in the latest issue of McDermott’s International News.

This article was co-authored by Emma Chen, who was an associate at McDermott at the time of writing this article.

https://www.employeebenefitsblog.com/2019/10/the-global-repercussions-of-local-employment-risks/

As presidential hopefuls bemoan the high cost of healthcare, McDermott’s Ted Becker imagines a stack of lawsuits pushed toward corporations and insurance companies. If workers can use the Employee Retirement Income Security Act to challenge 401(k) plans’ fees and investments, why can’t they use it to sue over how their health insurance plans are managed?

In a Q&A recently published on Law360, Becker discusses his prediction that health and welfare plan management suits will be the next frontier for ERISA plaintiffs, and how McDermott is preparing clients.

Access the full article.

https://www.employeebenefitsblog.com/2019/10/eye-on-erisa-qa-with-mcdermotts-ted-becker/

Although multi-jurisdictional compliance is a challenge in relation to every aspect of employment law, the structure of employment contracts and the enforcement of global policies require particularly careful consideration.

The need to coordinate individual country compliance across numerous countries whilst still maintaining a common company culture requires extensive knowledge of national laws and considerable flexibility.

Contracts

US-based businesses will be used to working with at-will offer letters, but these are mostly unheard of elsewhere. In most jurisdictions, detailed employment contracts are not only customary, but are required by law. As you would expect, companies must ensure the legal compliance of their contractual documentation for each country in which they do business. This includes engagement letters, employment offers, employment contracts, bonus schemes, stock option plans, etc.

With employment contracts, the most common approach is to prepare a contract compliant with local law in accordance with best practices in the jurisdiction where the individual is to be employed. Contracts should incorporate crucial terms, such as probationary periods, termination grounds, working time provisions, and post-termination non-compete and/or non-solicitation provisions.

  • Countries have varying rules on the maximum duration of a probationary period. For example, France permits an eight-month probationary period, one renewal included, for executives under an indefinite-term contract (contrat à durée indéterminée); whereas a 90-day probationary period is standard in the United States.
  • Subject to applicable statutory restrictions in each country, termination provisions provide a good starting point to enforce the departure of an employee, for example in case of a violation of company policies, such as a code of conduct.
  • In France, where the legal working time is 35 hours per week, there is the option of entering into flat-rate pay agreements for autonomous executives whose roles and responsibilities do not permit alignment with the collective working time/office schedule. In the United Kingdom, there exist more flexible, zero-hours contracts, under which the employer is not obliged to provide any minimum working hours but, equally, the employee has no obligation to accept the work offered.
  • The rules on post-termination provisions, such as confidentiality, non-compete and non-solicitation restrictions, vary significantly. Some jurisdictions follow a reasonableness approach (Australia, the United Arab Emirates, and the United Kingdom); others have outright prohibitions (India, Mexico, and Russia); and others mandate compensation for non-compete clauses (China, France, and Germany).

With so many nuances country-by-country, contract drafters often consider choice of law and jurisdiction clauses. Public policy considerations may, however, override such clauses. For an Italian citizen hired in Italy to work in Italy, it will be difficult to apply Australian law merely because the employer is an Australian corporation. The general rule is that the laws of an employee’s physical worksite will likely apply, regardless of such clauses.

The relevant law for all European Union countries is the Rome I Regulation. Under Rome I, foreign employees in Europe benefit from the mandatory laws of the country with which they have the closest connection, which will usually be the country where they normally work. Accordingly, a German employee working in France should receive a French law-governed employment contract, even if the employee works for a UK employing entity.

For highly mobile employees, however, the place of work is often debatable. For instance, English employment courts have decided that an employee working remotely in Australia has the right to bring an unfair dismissal claim in the United Kingdom if the work is done for a UK employer, regardless of the employee’s physical worksite.

Forum-selection provisions that call for a forum other than the place of employment tend to be unenforceable outside the United States. In London, US expatriates working under contracts with such clauses who sue before an English Employment Tribunal are unlikely to see their claim dismissed when their employer invokes the forum-selection clause.

In choice-of-forum situations, Europeans invoke the provisions of the “Recast Brussels Regulation.” These codify the general rule that employees rarely have to litigate employment disputes outside  their host country place of employment, even if  a choice-of-foreign-forum clause purports to  require otherwise.

Communicating Global Policies

Every organisation has bespoke policies, employee handbooks, and a code of conduct. In addition, every organisation has its own HR practices, such as evaluation processes and training programmes, all dictated by the corporate culture and even corporate vocabulary. It can be challenging to extend those across borders and the legal systems of different countries.

In France, policies related to safety, disciplinary procedures, harassment, whistleblowing, etc., particularly if the policy provides sanctions, must be incorporated within internal rules (règlement intérieur), which must be filed with the employment court and inspectorate. If a company fails to file its policies correctly, it may not be able to discipline employees for violating the rules.

Country by country, companies must consider the interrelationship between the contract and the applicable policies. In some jurisdictions, it is advisable to incorporate relevant handbook policies into the contract. In the United Kingdom, for example, it is compulsory to mention disciplinary and grievances procedures in the contract.

Language Barriers

Where the policies are written is, however, merely the beginning. How they are written is much more complicated. Communicating clearly in multiple languages is now a core HR function for global entities. Many jurisdictions, such as Belgium, France, and Poland, require contracts to be in the local language, even for an employee fluent in the primary language used by the employer. If the contract is not in the local language, its provisions, the policies, and other elements, will be unenforceable, at least for the employer.

A typical example is a global bonus plan, where a failure by the employer to translate the target objectives can allow the employee to claim a bonus without needing to comply with the terms of the plan (i.e., without achieving the stated goals or objectives). This has been confirmed by French case law.

In some countries, such as Turkey, the local language will always prevail, regardless of what is provided for in the contract. In those cases, ensuring translation accuracy can avoid inadvertently granting employees more generous terms under a local translation than the company intended.

Local language translations are also required for other purposes. For instance, in Spain the employment contract needs to be filed with the government, in Spanish. In other countries, such as China, works councils and unions will need to be consulted on the implementation of policies, and submissions for those consultations will need to be in the local language.

As a result, businesses now often consider whether to create employment documents in the local language only, or in two languages. If a document is used that has two columns showing the corporate language and the local language, it is crucial to state which language prevails.

This article was originally publish in the latest issue of McDermott’s International News.

https://www.employeebenefitsblog.com/2019/10/global-employment-contracts-the-modern-tower-of-babel/

A US Supreme Court case pitting pensioners against US Bank could have a wide-ranging impact on who can bring suit under ERISA, whether they participate in a defined benefit pension plan or a 401(k) plan.

Recently, on Law360, McDermott’s Richard J. Pearl weighed in on the impact of Thole v. US Bank, one of three ERISA cases that the US Supreme Court will decide this term. The case, discussed in greater detail in our On the Subject, will address whether defined benefit pension plan participants have standing to bring suit under ERISA if their plan is fully funded.

Although the case focuses on participants’ ability to bring suit on behalf of defined benefit pension plans, according to Pearl, the case seems to ask the high court to answer a question that often crops up in defined contribution plan litigation, as well: Whose injury matters, the plan’s or the person’s? As a result, the court’s decision could impact not only litigation involving defined benefit pension plans, but also defined contribution plans, where case law is still being developed around what gives a participant grounds to sue on behalf of a plan.

Access the full article.

https://www.employeebenefitsblog.com/2019/10/high-court-pension-row-may-have-broad-impact/

This month, Assembly Bill 5 (A.B. 5) was signed into California law. A.B. 5 codifies the “ABC Test”—used to determine if a worker is an independent contractor—which is broader, harsher and more inclusive than the common law test with which most businesses are familiar.

A.B. 5 appears to be the death knell of convenience for retaining contractors in the Golden State, as well as the advent of a new wave of wage and hour litigation.

Access the full article.

https://www.employeebenefitsblog.com/2019/09/a-new-landscape-for-businesses-with-california-operations-thanks-to-a-b-5/

In today’s high-stakes environment, in-house counsel and HR professionals are often on the frontlines, responding to headlines that threaten business and reputational objectives.

Join McDermott Will & Emery’s Employment and Employee Benefits practice groups at a half-day forum in our Chicago office on Oct. 10. This forward-looking program is designed to drive conversation around emerging trends to help employers craft their own narrative, instead of being held captive by it.

See full event details and register here.

https://www.employeebenefitsblog.com/2019/09/employment-benefits-and-compensation-forum-control-your-own-headlines/

The Internal Revenue Service (IRS) has once again extended the temporary nondiscrimination relief for frozen defined benefit plans, now through 2020. Frozen pension plans are pension plans that have been closed to new participants but continue to provide ongoing benefit accruals for certain participants. This extended relief is intended to enable frozen pension plans to satisfy certain nondiscrimination testing requirements. In most cases, the relief allows the frozen defined benefit plan to be aggregated with a defined contribution plan to satisfy the nondiscrimination testing requirements. The relief assists the aggregated plan in passing nondiscrimination requirements that apply to accrued benefits and to certain rights and features relating to those benefits.

The original nondiscrimination testing relief for frozen pension plans was provided in a 2013 IRS notice. This relief has now been extended on three prior occasions. Many are advocating for legislation that would permanently fix this issue by shielding frozen defined benefit pension plans from unintended nondiscrimination rule violations. The Setting Every Community Up for Retirement Enhancement Act, which includes nondiscrimination reform provisions, passed the US House of Representatives on May 21, but it is still pending in the US Senate.

https://www.employeebenefitsblog.com/2019/09/once-again-irs-extends-nondiscrimination-relief-for-frozen-defined-benefit-plans/

The Pension Benefit Guaranty Corporation (PBGC) recently issued a press release announcing that the Multiemployer Insurance Program remains in a dire financial condition, nearing insolvency. The agency’s insurance program for multiemployer pensions, covering more than 10 million people, will likely run out of money by the end of fiscal year 2025, according to the FY 2018 Projections Report. On the other hand, the PBGC’s projection for the Single-Employer Program shows continued improvement. However, these positive projections are subject to a range of potential outcomes due to the Program’s sensitivity to economic conditions.

Access the full article.

https://www.employeebenefitsblog.com/2019/09/pbgcs-multiemployer-insurance-program-faces-insolvency-while-single-employer-program-improves/

An employer learned the full cost of ambiguity when a Connecticut federal district court agreed with an employee’s widow that the word “maximum” was ambiguous in the company’s life insurance plan, thus making the widow entitled to an additional $4 million in benefits. This decision serves as a warning for employers sponsoring insured benefits.

Access the full article.

https://www.employeebenefitsblog.com/2019/09/tyll-v-stanley-black-decker-when-plan-ambiguity-cost-an-employer-4-million/

A Texas federal court certified a class in case brought by participants in one plan, and allowed those participants to represent participants in unaffiliated plans. The claims alleged that the defendants, who marketed and provided services to all of the plans, breached fiduciary duties by imposing excessive fees. See Chavez, et al. v. Plan Benefits Services, Inc., et al., No. AU-17-CA-00659-SS, United States District Court for Western District of Texas (Aug. 30, 2019).

Access the full article.

https://www.employeebenefitsblog.com/2019/09/federal-court-certifies-class-in-multiple-plan-erisa-challenge-to-health-plan-and-retirement-plan-fees/