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Companies expand daily to access global markets. Not only does the Internet give growing businesses immediate access to foreign markets, but also trade agreements encourage expansion and interaction abroad. Easier access to finished products, raw materials, technology and labor readily fuel this expansion. How can general counsel minimize or avoid liability resulting from their companies’ overseas employment practices? In-house lawyers must understand how the equal employment opportunity laws of the United States will apply to their workforce overseas, particularly the Age Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act of 1964 and the Americans with Disabilities Act of 1990. In 1991′s EEOC v. Arabian American Oil , 499 U.S. 244, and the companion case Bourselan v. Arabian American Oil , the U.S. Supreme Court focused on the general presumption against the extraterritorial application of American laws, including labor laws, in denying relief to plaintiffs in these cases. Congressional legislation is meant to apply only within the territories of the United States. For a specific law to reach nondomestic conduct, a judge must find a clear expression from Congress. Most states’ anti-discrimination laws also presume to apply only within the states and U.S. territories, absent statutory language giving them express extraterritorial effect. In response to the perceived inequities of Bourselan , in 1991 Congress amended the ADA and Title VII by redefining “employee” to include U.S. citizens employed in foreign countries. Congress had already amended the ADEA in 1984 to give it extraterritorial effect. In other words, most EEO laws will apply to protect a company’s U.S. citizen employees working abroad. Forming a foreign subsidiary to employ Americans working abroad for U.S. companies won’t let a company avoid the reach of these U.S. equal employment opportunity laws. The 1991 congressional amendments to the ADA and Title VII provided that discrimination against a U.S. citizen employed abroad will be covered if engaged in by an “American employer” or by a foreign corporation controlled by an American employer. This control test is the same under the ADEA. Thus, the Equal Employment Opportunity Commission will assess nationality and control in determining whether U.S. laws apply. The following control factors — all four need not be present — will be the investigator’s focus: 1. interrelation of operations; 2. common management; 3. centralized control of labor relations; or 4. common ownership or financial control. Interrelation involves an inquiry into whether the parent U.S. company is directly involved in the foreign subsidiary’s daily decision-making, such as production, distribution and marketing. Inquiring minds will want to know whether the two companies share employees or equipment or have commingled accounts, inventories, credit sources, debt or accountings. An investigator may deem two entities to be commonly managed where the management structures of the two companies are not separate and distinct. Several factors become relevant in determining common management: Does the U.S. entity appoint management members to the foreign entity’s board? Does the U.S. entity assign products to be marketed by the foreign entity? Similarly, in determining centralized control of labor relations, the EEOC investigator will examine whether corporatewide personnel policies exist. Do foreign personnel decisions require approval of a U.S. entity? Do compensation, benefit or operating condition changes require approval of a U.S. entity? Do the two entities share employees? Do employees apply to the parent for a job with the subsidiary? An EEOC investigator normally determines common ownership or financial control by examining shareholders, board members and officers. The bottom line: Creating a subsidiary probably will not establish a barrier to liability for adverse employment actions taken against U.S. citizens who work for American companies abroad. CONFLICT OF LAWS Courts look more favorably on companies that can establish they simply are obeying their host country’s laws. Businesses can mount a conflict-of-laws defense against claims by expatriates if it is impossible to comply with American EEO law and the law of the foreign country. Under the conflict-of-laws defense, it’s lawful for an employer to take an action if not doing so would violate the laws of the host country — even though American EEO laws otherwise may prohibit the action. This defense would come into play if an American company operating in France — where the mandatory retirement age is 65 — fires an employee once he reaches 65, even though doing so violates the ADEA. GCs can easily determine when a foreign-laws defense is available: 1. Does the practice involve an employee in a workplace in a foreign country? 2. Would compliance with the EEO law cause the employer — or entity controlled by such employer — to violate the laws of a foreign country? 3. Is the workplace located in that country? The bottom line is that the EEOC will examine a company’s motives in taking the unlawful employment action. If sending 63-year-old Fred to France was motivated solely by a desire to force his early retirement — and not to increase cheese production — then Fred should be able to make a valid claim under the ADEA. Sometimes, determining what a “law” is proves troublesome for in-house counsel. To help, the EEOC has issued guidelines stating that the following do not constitute laws: 1. an employer’s corporate charter registered with a foreign government; 2. the employer’s rules, regulations and employment policies; and 3. preferences of the host country. In-house counsel can find these guidelines at www.eeoc.gov/policy/. GCs can find more helpful information at www.eeac.org. Also, a bill required to pass in both houses of a legislature or parliament is not a law until both houses pass it. Generally, if it is codified, it is a law. In addition to the limited discussion above, many other issues come into play for GCs whose companies have employees abroad: the foreign sovereign compulsion doctrine, which restrains judicial intervention where a host country requires actors to behave in ways that otherwise would be illegal; the act of state doctrine, which limits judicial action when another government decrees the acts in question; and the problem of what attributes constitute a bona fide occupational qualification, sufficient to shield an employer from liability for discrimination under Title VII. Latent issues such as these open a Pandora’s box of considerations in making employment decisions. For example, Is an arguably unlawful act under American standards involuntary because the laws of a foreign country compel it? Do mere preferences of a host country constitute a bona fide occupational qualification? Answering those questions with certainty will require many years of court-fashioned labor law — based on international precedent or the extraterritorial application of U.S. law — to fully evolve. Amy B. Ganci is senior counsel at Cowles& Thompson in Dallas. She is a member of the American Bar Association Section of Labor and Employment Law. Her practice includes counseling multinational companies about employment matters. Her e-mail address is [email protected] This article was originally published inTexas Lawyer , aRecorder affiliate based in Dallas. • Practice Center articles inform readers on developments in substantive law, practice issues or law firm management. Contact News Editor Candice McFarland with submissions or questions at [email protected]or go to www.therecorder.com/submissions.html.

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