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Session #506 ACC 2014 Annual Meeting New Orleans, Louisiana

Presented By:

Erin Heller, Assistant General Counsel — Western Digital Corporation

Sandra McLelland, Senior Counsel — Under Armour

Nolan Lim, Corporate Counsel — TrueBlue, Inc.

Connie Reeve, Partner — Blake, Cassels & Graydon LLP

Expat Assignments and Globally Mobile Workers:

Best Practices for U.S. Based Employers

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Session Agenda

• Introduction to the Panelists

• General global mobility issues

• Considerations for employees entering the U.S.

• Strategy for expat assignments

• Use of foreign partners overseas

• Application of U.S. law overseas

• Country specific lessons

• Immigration and employment law issues in Canada

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Global Mobility Issues

Immigration

Benefits

Employment Law

Compliance

Import/Export

Tax

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Global Mobility Issues

Need a global approach with common touch points

• Establish communication between the stakeholders

• Establish a process owner

• Periodically evaluate process for adherence and improvement

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Global Mobility Issues

• What is the business need?

• What is the cost?

• What visas may be necessary?

• How long can they stay?

• What can they do when they are there?

• Who will be the employer?

• Which laws will apply?

• What are the tax consequences?

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Tracking Business Travelers

Where are your employees?

• Have an accounting of who is on-site

• Working remotely from other sites

• The “stealth assignee”

– Business travelers

– Trip extensions

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Immigration Concerns

Threshold questions:

• Length of time?

• Type of work EE will be doing?

• Which entity can make payments under various visas?

• Local laws?

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Immigration Concerns

Bringing Foreign Workers to the U.S.:

• Short Term Visitors -

– B Visas

– J-1 Exchange Visitor Visa

– H-3 Trainee Visa

– L-1 Intercompany Transfer Visa

– H1-B Specialty Occupation Visa

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1. B Visas

a. Scope: Business visitor only. No active employment. Meetings are typically ok.

b. Length of Stay: Up to 6 months with the possibility of an extension for another 6 months.

Cost must be borne by home site.

c. Dependents: Accompanying spouse and minor children can come under B-2 tourist visa.

2. J-1 Exchange Visitor Visa

a. Scope: Training that is not available in home country and will facilitate career when he/she

returns. Detailed training program is required. Must be administrated by a State

Department authorized program; training can be done by sponsoring U.S. company.

b. Length of stay: 10 months.

c. Dependents: Spouse and children can be issued J-2 visa.

3. H-3 Trainee Visa

a. Scope: For training only. No productive employment.

b. Length of Stay: Two year limit.

c. Dependents: Spouse and children on H-4.

4. L-1 Intercompany Transfer Visa (L1A & L1B)

a. Scope: Used to temporarily transfer foreign employees for assignments to U.S. operations.

Need one year of employment outside U.S. prior to use.

b. Timing: Up to three years with the possibility of extension up to 5/7 years (depending on

type of work).

c. Dependents: L-2 for spouse and child.

Immigration Concerns

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H-1B Specialty Occupation Visa

• Scope: Position must be in a specialty occupation, need at least a bachelors degree.

• Permitted length of stay: 3 years with extension up to 6 years.

• Limits: Limited number awarded each year, subject to lottery.

• Wage Considerations: Wages must be same/similar to U.S. DOL position is that the employer must pay the “prevailing wage”.

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Special Considerations for H1B Visas:

• Careful in job offers not to change “at will” nature of job.

• Don’t bind company to permanent residency sponsorship.

• What to do if H-1B application is denied?

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A Cautionary Tale

Department of Justice/Infosys Corporation Settlement

• $34 million dollar negotiated settlement for allegations of systemic visa fraud and abuse of immigration processes

• Brought by an internal whistleblower

• Allegations included misuse of H-1B and B visa process. False statement made in “invitation letters” to U.S. Consular Officials and coached visa holders to make false statements to officials. Additional allegations of failure to maintain I-9 records.

• Tag along discrimination lawsuits

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Immigration Concerns

Permanent Residency Process

• Timing

• Prevailing Wage Considerations

• Testing labor market

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Audits

• USCIS has increased its anti-fraud auditing staff and will conduct surprise on-site visits to companies that sponsor foreign workers on H-1B and L-1 visas.

• Designate a lead employee for audits

• Inform reception staff who to direct audit inquiries to

• Maintain immigration documentation in a manner that leaves the materials easily accessible in the event of a site visit

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Employment Law Concerns

U.S./CA specific issues:

• State and Federal wage and hour laws

– FLSA:

• Overtime

• Exempt

• Recordkeeping obligations

– State laws may pose additional requirements

• Misclassification concerns

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Employment Law Concerns

Discrimination claims:

• IRCA makes it an unfair immigration-related practice for an employer or other entity to discriminate against any individual because of their citizenship. 8 USCA Sec. 1324b(a)(1)

• DOJ is enforcing this and hears complaints regularly through the Office of the Chief Administrative Hearing Officer.

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Import/Export Issues

• Deemed export rule: Any technology disclosed to a person in the U.S. on a non-immigrant visa is deemed an export of that technology to his/her home country

• Consider whether a license is required

• Where is the person from?

• How sensitive is the technology?

• Expect Audits and Follow Up

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Lessons Learned Going Global – What is the Strategy?

• What is the business objective/purpose of assignment?

• What is the length of the assignment?

• Are you a business visitor or an expat?

• How are employees selected for global assignments?

• Identifying the corporate entity that will employ the expat

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Types of Assignments

1. Home-country entity employed and paid (full secondment)

2. Home-country entity employed/host-country entity paid (partial secondment)

3. Localized/Transfer

4. Localized with “hibernating” home-country entity agreement

5. Dual employment contract

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Outbound Immigration Concerns for Business and Expats

• Level set expectations of business on time needed to obtain proper work and residency permits

• Any issues with obtaining required visa for employee that will prohibit or delay start of the assignment?

• Business reason for why an expat is needed instead of a local hire

• Job description

• Any local recruiting effort?

• Impact of previous visas

• % of expats to local employees

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Common Documents Needed by Immigration Outside of the US

• Passport – current and prior

• Resume

• Job description

• Previous visas

• Business registration documents for entity sponsoring visa (articles of incorporation, business license, and other official documents)

• Employment Contract and/or Assignment Letter

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Possible Documents Needed by Immigration Outside of the US

• Birth certificate

• Marriage certificate

• Evidence of health insurance

• Evidence of recent health exam

• Education records – diplomas, certificates

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Payroll, Compensation & Benefits Considerations

Remain on home country payroll or move to local payroll?

What is structure for expat compensation?

Replicate home-country package

Put on host-country package

Align expat packages globally

How will compensation be determined?

Mirror existing comp (“keep whole”)

Hardship allowance

Currency exchange

Impact of foreign expat salary in comparison with similarly situated local employees

Cost of living adjustments (“COLA”)

Housing – in host country and leaving behind in U.S.

Moving expenses

Travel – home visits

Vacation – home or host country standard?

Holidays – home or host country standard?

Education for dependents

Transportation – Vehicle Allowance or Driver?

Health benefits

Workers’ comp

Expat orientation, cultural training, language training

Emergencies (public, personal, death)

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Dependents/Family Accompanying Expat on Assignment

• What constitutes “family?”

• What is a dependent?

• Education for dependents typically grades K-12

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Tax, Social Security & Pension

• How will taxes be handled? What is company responsible for versus employee?

• Tax equalization, tax gross-up, tax credits, tax treaties, tax preparation?

• Tax considerations when approaching 5 years abroad

• What local plans will expat be eligible to participate in/receive?

• Can expat continue to participate in home-country plans?

• Social security – mandatory social security contributions in host country; compensation for loss of home-country contributions

• Pension continuation; 401k plans

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Considerations for Documenting Expat Assignments

• Length of assignment

• Who will pay immigration costs

• Who will pay for tax preparation/assistance

• Choice of law

• Reaffirm or establish policies (FCPA, ethics, non-compete, confidentiality, IP, handbook)

• Repatriation/end of assignment

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I. Partnering With Third Parties to Employ Workers Oversees

Most Common Issues to Consider When Employing Workers Abroad

A. Use of Independent Contractor

B. Used of leased employees through a staffing company

C. Common Risks Applicable to Independent Contractor or Leased Employees

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Independent Contractors

Independent Contractor Relationship Formation:

• In most jurisdictions, substance over contract prevails

• Be aware of special jurisdictional rules for contract

• Consider adding indemnification clauses

• Business to Business contracts mitigate de-facto employee risk

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Consequences of Independent Contractors Being Held De Facto Employee

• Tax, SS, Unemployment Compensations, Overtime, Benefits, Interest and Penalties

• Holiday Pay, Back Mandatory Benefits

• Fines

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Leased Employees

• Structure of a leased employee relationship

• Domestic Principal Contracts with Foreign Staffing Company to Payroll Employee

• Substantially eliminates potential misclassification risks

• Creates joint employment risks – Principal could be joint and severally liable for employees misconduct

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Common Risks Associated With Third Parties Overseas

• Permanent Establishment – When am I doing business?

• Local Independent Contractor Regulations

• Subcontractor to Independent Contractor Risks Contractor Pay Reporting

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US Law Application Overseas

• Discussion of Title VII liability applied to workers oversees

• Criminal law applications – When do US Criminal Laws Apply to Conduct Abroad

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Employment Law Applications Overseas

• Title VII Does Not Apply to Workers Employed by Independent Foreign Entities

• Courts will look to the degree of control the US entity exercised over the foreign entity

• Friendship, Commerce, and Navigation (FCN) Treaties Application in the US

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Extraterritorial Application of American Criminal Law

• Presumption against extra-territoriality

• US criminal code applies in special maritime and territorial jurisdictions

• Private Military and Security Contractors are Potentially Subject to the US Criminal Code

• Workers that commit crimes on US territory are potentially subject to US criminal liability

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Immigration Issues

Work without a work permit

Business visitors – NAFTA business visitor criteria

• Intra-Company Trainers and Trainees

• After sales service

• Other miscellaneous categories

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Work permits: Labour Market Opinion required

New challenges to obtaining work these permits

• Changing regulatory requirements

• Increase in lead time to establish “reasonable efforts” to recruit Canadians

Immigration Issues

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Immigration Issues

Work permits exempt from LMO requirement

Inter-Company transferees

• Executive, senior managerial or specialized knowledge capacity

• New guidelines regarding “specialized knowledge” category:

- Proprietary knowledge and advanced expertise

• Continuous employment for one year with transferring employer

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Employment Law Issues

When will Canadian/Provincial law apply?

• Local laws apply to work performed in the jurisdiction

• Includes human rights and minimum standards laws

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Employment Law Issues

Choice of law and jurisdiction?

• Real and substantial connection

• Employment contracts treated differently than commercial agreements

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Employment Law Issues

No recognition of “at will” employment

• At will clauses if applicable to employment in Canada will be struck

• Reasonable notice requirement fills the gap

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Employment Law Issues

Just cause standard for termination

• Wilful misconduct

• Wilful neglect of duty

• Requirement for “contextual” approach

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Employment Law Issues

Enforcing restrictive covenants

• prima facie against the public interest

• Covenants must be reasonable

• Careful drafting required

• No blue penciling by Canadian courts

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Practical Issues

Offer/Transfer Letters

• Should address minimum protections under provincial laws

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Practical Issues

Waiting periods for Canadian healthcare coverage

• Bridge coverage should be considered

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Practical Issues

Costs of tax equalization

• Higher tax rates

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Final thoughts on country specific issues

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Questions?