Globalization of Labor & Employment Law: Opportunities, Challenges, and Best Practices

1. The Globalization of Labor and Employment LawApril 22, 2010 Michael W. Hawkins, Esq. Colleen P. Lewis, Esq. Dinsmore & Shohl LLP 255 East Fifth Street, Suite 1900 Cincinnati, OH 45202 Phone: 513.977.8200 Email: michael.hawkins@dinslaw.com; colleen.lewis@dinslaw.com

2. Michael W. Hawkins, Esq. Michael Hawkins is a partner with the Cincinnati, Ohio ALFA International law firm of Dinsmore & Shohl, LLP. He received his J.D. from the University of Kentucky, College of Law (1972), Order of the Coif, Lead Article Editor, Kentucky Law Review and his B.A. from the University of Kentucky (1969). He serves as a Mediator and Arbitrator on the American Arbitration Association Commercial and Employment Panels and for the National Arbitration Forum. He is a frequent speaker and writer on mediation and arbitration. He taught Conflict Resolution and Mediation at Xavier University where he was an Adjunct Professor. Mr. Hawkins' practice includes representing employers in all aspects of employment law and litigation and labor relations as well as business competition litigation. Mr. Hawkins currently serves as Chair of ALFA International. Mr. Hawkins has been listed since 1992 in The Best Lawyers in America and selected as an Ohio Super Lawyer. He argued National Labor Relations Board v. Kentucky River Community Care and Humphries v. CBOCS West, Inc. before the United States Supreme Court.

3. Colleen P. Lewis, Esq. Colleen P. Lewis is a Partner in the Labor and Employment Law Department. Colleen's practice includes the defense of private and public employers on a wide array of traditional labor and employment issues, including discrimination and civil rights issues, Family and Medical Leave Act compliance, Americans With Disabilities compliance, breach of employment contracts, employment-at-will, wage and hour, and National Labor Relations Act. She handles collective bargaining and arbitrations. She also has extensive experience reviewing and drafting Affirmative Action plans and representing companies before the OFCCP. Colleen's practice encompasses both national and regional representation of clients in state and federal courts and she has handled labor and employment matters in 13 states. Colleen is former Chair of the firm's Recruiting Committee. Colleen is Chair of the Firm's Workplace Harassment Committee. She is a member of the firm's Professional Development and Diversity Committees.

4. The Globalization of Labor and Employment Law • To keep up with competitors, businesses have been expanding around the globe. These expansions offer unique but exciting human resources opportunities and challenges. • Language barriers are not the only issue a human resources representative may encounter when attempting to set up operations in a different country. • Cultural differences in recruiting, compensation, laws and daily procedures may present difficult challenges and require unique solutions.

5. Involvement of Human Resources Representatives During Potential Mergers and Acquisitions • Companies have historically focused on the mere financials of a merger or acquisition to determine whether it would be a good fit with another company for expansion. • Unfortunately, this philosophy tends to ignore the largest asset of the merger – the acquisition of the workforce and the people involved.

6. Hiring Local Executives Rather Than Transferring Company Executives • Eliminating this “us-vs-them” approach early helps demonstrate the company’s confidence in the newly formed or acquired branch. • These “local executives” are typically more familiar with the local workforce (who will be the backbone of this local office) and can connect more easily.

7. Advantages of Hiring a “Local Executive” • Cheaper • Knows local market customs so they can better spot emerging trends • Understands how to motivate other local national staff • Increasingly knows English and are more available and qualified

8. Disadvantages of Hiring a “Local Executive” • Takes time to be brought up to speed on highly technical product lines • Lacks the personal connections at corporate headquarters • Demand for local executives typically exceeds supply

9. Advantages of Transferring a Company Executive • Knows the Company’s products and culture • Unlikely to steal propriety knowledge and set up competing business • Does not put “country” ahead of “company” • Easily communicates with corporate headquarters

10. Disadvantages of Transferring a Company Executive • High cost (relocation, housing, training) • Difficulty in moving spouse, children • Concern for life-style changes and security • Concern for negative out-of-sight, out-of-mind impact on career development

11. Global Employment Policies • Rather than creating different policies for every country where a company is located, companies have began to establish a global approach to employment policies and procedures. • These policies serve as a global framework for a company’s practices and help in integrating the company’s beliefs about issues that are applicable across the globe.

12. Global Employment Policies • Poverty Alleviation. Give priority to productive employment to the working poor as basis for all development strategies and policies. • Sustainability. Integrate economic, social and environmental objectives in all global strategies and national policies and give priority to new technologies, production methods and consumption patterns, through which economic growth can be decoupled from pressure on national resources.

13. Global Employment Policies • Gender Equality. Mainstream equal opportunities between men and women in all global strategies and national policies and ensure that women are enabled to fully contribute to and benefit from economic and social development. • Employability and Adaptability. Give priority to life long learning to make people ready for existing and future jobs, and strengthen social dialogue to facilitate flexibility of enterprises and to promote workers’ security in employment.

14. Developing Global Compensation and Benefits • Having a universal philosophy eliminates the potential for disparate treatment between different locations or the establishment of a precedent that may be impossible to attain as the company continues to expand. • Competitive comparisons would be made against other leading companies in each country. • Base salary policies normally would be established at the median, or 50th percentile.

15. Developing Global Compensation and Benefits • Management incentive plans would be structured to provide total compensation at the upper quartile, or 75th percentile, provided performance targets were met or exceeded. • Benefit plans would be established not to exceed market median.

16. Safety in the Workplace • Dealing with everything from civil wars to global terrorism, companies recognize the safety concerns of both its local workers and when sending employees from its headquarters to another location.

17. The Current Economy • Frequently, local divisions are more expensive to run, but companies feel a sense of commitment to its own economy, thus creating a difficult decision. • In response to these economic times, companies are creating unique solutions, such as having employees work four longer days and then have three days off.

18. Checklist for International Expansion • Employment/Immigration Issues • Ensure labor laws do not transcend employment agreements. Understand mandatory bonus, vacation, termination payment laws. • Does “at-will” employment exist • If not, employer responsible for payment after employee termination.

19. Checklist for International Expansion • Must a training program be created and registered? • Native hiring • Does the country have this requirement? • How many citizens must be hired?

20. Checklist for International Expansion • Are “noncompete” agreement recognized? • Employee inventions • Level of employee right to ownership

21. Checklist for International Expansion • Visa requirements for U.S. workers (personal tax ramifications) • Employment Agreements, policies, handbooks • Expatriate package, tax and estate planning, tax equalization • Mandatory profit sharing requiring the consideration of alternate structures

22. International Labor and Employment Checklist • Terms and Conditions of Employment • Contracts • Written employment applications, contracts, handbooks and statements of employment • Lifetime employment, severance indemnities • Modification/Absence of Employment At Will • Form agreements for Senior and employees • Independent Contractors/Distributors • Staffing Agencies/Temporary Workers

23. Discipline • Codes of Conduct • Employee Handbooks • Disciplinary Procedure • Notification • Grievances • Appeal

24. Unionization/Collective Bargaining • Right to Organize • Organize Workers’ Freedom of Association • Power of Unions • i.e. – All-China Federation of Trade Unions

25. Termination • Process (Notice) • Grievance Procedure • Arbitration • Severance • Lay Off/Shutdown Procedure

26. Legal Concerns • Application of American Discrimination Laws Abroad • Alien Tort Claims Act • Railway Labor Act • Choice of Law • Simultaneous Application of U.S. and foreign law to U.S. workers abroad • U.S. and other Export Control Laws

27. Legal Concerns • Immigration/Naturalization Laws • Sales agents deemed employees? • Independent contractors deemed employees? • Employee’s income tax/equalization and estate tax issues for dual nationals • Restrict authority/ability to bind through local powers of attorney or otherwise?

28. Legal Concerns • Authority over bank accounts limited? • IP ownership/inventions? • Mandatory profit sharing, bonus and vacation • Mandatory native hiring schemes? • Tax incentives for local hiring?