In recent years, the frequency with which international corporations move employees from country to country has increased dramatically, as have so-called functional reporting arrangements where employees in one country report on a daily basis to managers who work in a different country. Non-US employers have increasing reason, therefore, to be concerned about potentially devastating US employment discrimination litigation (witness the recent sexual harassment woes of Mitsubishi Motors Co and Astra AB, and Texaco's recent $170 million racial discrimination settlement). Frequently, employment law questions are intertwined with conflict of laws issues, such as: If an employee based in a US branch office receives sexually harassing e-mail messages from a manager abroad, is the parent corporation liable in the United States? If so, must the parent company instruct its managers around the globe in the niceties of US employment law and, particularly, US anti-discrimination law? If an American employee working in a New York branch office of a European company claims that her coworkers, who are on overseas assignments in the same branch office, receive special 'expatriate' benefits, can the Americans sue for national origin discrimination? If an American employee working in her non-US employer's home office is not allowed to take an extended leave to care for a sick child, is she entitled to sue the corporation under the US Family and Medical Leave Act (FMLA)?
There is a little doubt that if the employer is a United States corporation, then American anti-discrimination laws, such as Title VII (which bars racial, sexual and national origin discrimination), and ADEA (which bars age discrimination), would protect each of these employees, no matter where the employee works. For non-US corporations, however, the issue becomes muddled (and its resolution becomes fact-specific) because US employment law does not typically regulate the conduct of foreign corporations outside of the US unless that conduct reaches employees working in the United States.
Few international companies are immune from employment litigation headaches in the United States as the list of the foreign corporations on the wrong side of those recent lawsuits demonstrates - such established corporations as Smith Kline Beecham Corp, Royal PTT Nederland NV, Sanyo Securities Co., Ltd., ASLK Bank, NV, Banque Nationale de Paris, Max Mara Fashion Group, SpA, Icelandair, Samsung, TC Ziaraat Bankasi and Studor Revox AG have all been recently targets.
The lack of jurisdiction defence
The simplest way to prevail in litigation is to avoid the jurisdiction of the court altogether. For instance, in Dewey v PTT Telecom Netherlands, US, Inc, the court ruled that Title VII and ADEA did not apply to Dewey's discrimination claims because the New York branch office where Dewey worked employed 13 employees - Title VII only applies to corporations with 14 or more employees, and ADEA only applies to those with 20 or more employees. The court refused to credit the fact that the Dutch parent company employed over 100,000 employees, even though most of the branch office's directors were Dutch employees of the parent company, because there was no evidence that the parent controlled the branch office's hiring and employment practices such that they were a "single employer".
Similarly in Robins v Max Mara, USA, Inc et al, the Italian parent corporation argued that it was not subject to personal jurisdiction in New York, on the plaintiff's claims of breach of an employment contract and employment discrimination; but the court rejected this defense and noted that where a foreign corporation sells good in New York through a subsidiary, such activity subjects the parent corporation to personal jurisdiction in New York. After noting that the decision to terminate the plaintiff's employment was made by the Chairman of the domestic subsidiary, who was also the Chairman of the foreign parent corporation, the court dismissed the case, because the Chairman's acts in his role as Chairman of the domestic subsidiary were unconnected to his position as Chairman of the parent corporation, and thus the parent corporation did not act as plaintiff's employer.
Defending on the merits
In case where there is no doubt about the court's jurisdiction, such as Fitzgibbon v Sanyo Securities American, Inc, et al, foreign corporations can defend against claims of national origin discrimination by demonstrating that American employees working in domestic branch offices are treated similarly to expatriate employees working in the same offices. In Fitzgibbon, the plaintiff claimed that American employees received lower salaries, bonuses and benefits than foreign employees hired or transferred to the New York branch office from abroad. The parent corporation responded by:
- explaining that any enhanced compensation given to foreign employees was based on the fact that those employees were maintaining residency outside of New York; and
- pointing out that international employees hired in New York who maintained residency in New York were given similar compensation as plaintiff.
The court held that the parent corporation's rationale for implementing its compensation program was non-discriminatory and dismissed the case.
Similarly, the plaintiff in Nordahl v Studer Revox America, Inc et al, who was hired by the parent corporation in Switzerland and sent to work for a subsidiary in the United States, argued that he was the victim of national origin discrimination because the parent corporation only terminated foreign employees, rather than Swiss employees, during times of financial distress. The court dismissed the plaintiff's claims after finding that Nordahl was not replaced by a Swiss employee and that he was not treated differently from similarly-situated employees.
Likewise, in Weeks v Samsung Heavy Industries Co, Ltd, the court dismissed the plaintiff's national origin discrimination claims - he alleged that he was unlawfully demoted to allow a Korean employee to assume his responsibilities - because the claims were barred by the parent corporation's invocation of the Treaty of Friendship, Commerce and Navigation between the US and Korea, which authorized companies of either country to engage executive personnel of their choice, thereby removing such employment decisions from the realm of US discrimination law.
While there are no simple answers to these complex employment litigation issues, careful advance planning, counseling, and well-drafted employment agreements can resolve many difficult international assignments and other personnel issues. Planning and documentation are especially important to prevent an employer's exercise of its right under US law to terminate the employment relationship from turning into an expensive (and never-ending) legal battle.