Moving into new markets overseas can provide big opportunities for many companies. In some countries, corporate growth comes with high-profile security problems and political pitfalls. But there are also subtler, and often no less harmful, issues related to immigration law that can plague expansion into international jurisdictions.
Ian Macdonald, a shareholder at Greenberg Traurig who specializes in immigration and global mobility programs for multinational companies, told CorpCounsel.com that there are several mistakes companies make in this area that can be avoided with proper knowledge and support from in-house and outside counsel. Here’s the half dozen he says companies need to focus on:
Sending employees to do work in another country, even if the country is considered pretty safe, usually has some level of risk involved. If, for example, an employee gets injured or in legal trouble while abroad, employers need to have a plan. “The recommendation to employers is: conduct a proactive review and assessment of legal obligations, and separately conduct an assessment of best safety practices abroad to protect your assets and employees,” Macdonald said. Employers should keep in mind that any waivers or releases they have their employees sign in the U.S. might not work once the employee is in another country.
And assessments of risk shouldn’t just be confined to employees from a company’s home country traveling abroad. “A lot of companies focus on expatriate populations [more than] local employee populations, and provide higher levels of protection to expatriate employees than to local employee groups,” said Macdonald. Failing to make locally compliant plans for employees in case something goes wrong on the ground can only lead to trouble from a legal, safety and reputational perspective.
With the expenditure of time, money and energy it takes to get work permits or visas, it’s often tempting to focus on business expediency without thinking about immigration noncompliance dangers. One situation that Macdonald said comes up frequently is when employees are sent abroad under a “business visitor” category, usually only intended for shorter-term stays, when they should have a work permit or visa. Cutting corners by going “stealth” is fairly easy, it’s just a matter of getting on an airplane, he noted, and many companies don’t monitor business travel closely enough to notice the violation. However, host-country immigration authorities eventually will. “If you go the stealth business visitor route, it’s like playing Russian roulette,” he said. “It’s only a matter of time before something really goes wrong.”
And when it does, there are consequences. “The risk is known but disregarded, because historically it hasn’t been something authorities around the world have focused on,” Macdonald said, “but in the last few years, scrutiny is at an all-time high.”
So your company has invested countless hours and a pile of dollars into bidding on a project or contract in another country—and won. Congratulations! Now, how are you going to staff it?
According to Macdonald, this is a “classic” problem that companies encounter when they get work in a country where they don’t have much in the way of existing operations. “When bids are being put together they’re really looking at being aggressive, so they incorporate low margins for services rendered, and they also build in fast turnaround service-level agreements,” he said. This is all fine, but only if the company has a plan for how it’s going to get the appropriate immigration papers for its staff within the time constraints imposed by both the project parameters and immigration officials.
Mergers and acquisitions are exciting events for companies. But with all the fast-paced activity that comes along with M&As, companies have to remember not to cut corners on immigration issues (accidentally or knowingly), or else legal liability might put a damper on the transaction.
When ownership shifts, the countries involved with an employee or group of employees’ immigration arrangements might very well change too. “Anyone who is on a visa suddenly could be working illegally, which creates individual liability for the employee, and corporate liability in the form of civil penalties and possible debarment from immigration programs for the company,” said Macdonald.
In some cases, companies could end up losing high-level employees in M&A transactions, and with restrictions on the numbers of visas issued, as is the case with coveted H-1B visas in the U.S., it might be impossible to hire them back for a long time.
Another problem might arise in the course of employees actually traveling from one country to another. Sometimes, business travelers, such as in-house attorneys, forget that other countries will not necessarily have the same laws protecting client privilege that the U.S. does.
“It is absolutely feasible that an individual, who may be a U.S. attorney working for a large Fortune 500 company, gets on a plane for a three-day business visit to China, for example,” said Macdonald, “and is stopped by Chinese customs authorities and they go through his bags and they say, ‘We see you have a laptop, we see you have an iPhone, and you have a company BlackBerry here too. We’re confiscating these.’”
When foreign officials access private client information, the legal dangers pile on quickly. The outcome may depend, Macdonald explained, on the level of power granted by local laws to the authorities taking the information, what sort of data is being accessed and the location of servers that online data is traveling through, among other factors.
Therefore, especially when it’s an attorney doing the traveling, it’s essential to be careful. “It is incumbent on companies to have a comprehensive plan in place with respect to attorney-client privilege,” noted Macdonald. To prevent major problems during travel, some companies provide their employees with new laptops or thumb drives that have been wiped clean, so there’s no data for foreign authorities to seize, he added.
In addition to data, one of life’s inevitabilities—taxes—also can create major headaches for companies doing work overseas. Macdonald said that companies and individual employees should exercise a great deal of diligence in this area, or else they might be unaware that they’ve established a tax presence abroad. “From a corporate tax perspective, certain countries will say that based on the volume of people you have who have traveled to our country, you’ve created a permanent establishment and additional tax presence for the company,” he explained.
The overseas tax problem, according to Macdonald, can also be an indicator of other issues. “If a company is determined to have an unplanned tax presence, then it’s likely there is immigration noncompliance lurking in the background,” he said.