Employment Lawyers for Australian Executives
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11th December 2019Call 1300 789 302
11th December 2019 Melbourne & Sydney time: 3:50 pm
Before you sign an expatriate employment agreement, there are a number of preliminary matters that you should address your mind to. These matters include:
When dealing with a recruitment consultant/senior company executives, take a careful note of any representations which may be made regarding pay and conditions. The Competition and Consumer Act 2010 is proving particularly important in executive contract litigation. Under this legislation, representations may be actionable if they are misleading and/or deceptive. It is strongly recommended that you cultivate the diary habit, as a detailed contemporaneous file note can be invaluable when reconstructing events.
It would also assist if you could create a paper trail of confirming e-mails as to the representations that have been made to you. You should avoid using the word “representations” or wording your correspondence so that it sounds as if it has been written by a lawyer. All you need say is that you “confirm” the position title, salary and conditions etc. and whatever else that has been said to you.
If you have been headhunted for a new role, and you are already employed in another position, you should make sure that the recruitment consultant realises that, if you accept the proposal being offered, you will be leaving a lucrative opportunity with respect to which you had long-term prospects.
If you wish to save yourself a lot of stress and disappointment with probably disastrous repercussions for your family, you need to pay close attention to the expatriate service agreement.
The discussion that follows below has been in no small part drawn from the experience of many senior executives If you wish to avoid making the same mistakes then you should adhere strictly to the following principles.
For a general discussion regarding the negotiating of an executive employment contract, you should refer to the article on this website entitled Negotiating an Executive Employment Contract. The material below will focus on those issues particular to expatriate service agreements.
Have a clear understanding of the identity of the employing entity
Have a clear understanding of the legal status of the company that is employing you, whether it has recognition and assets within the jurisdiction and, if not, be aware that this may cause problems later.
Is it a locally incorporated Australian company or a foreign legal entity or joint-venture company with no presence in this country?; i.e. you need to establish whether or not it is a “Recognised Foreign Company” within Australia.
If it is not a “Recognised Foreign Company within Australia”, then if legal proceedings have to be subsequently commenced, there may be complications.
This arises because, while the proceedings may be able to be issued in a local Australian court, the actual court document will need to be served on the foreign Corporation in its country of origin. There may be a local Australian lawyer who will accept service of the court documents on behalf of the foreign Corporation but if this is not the case, this will necessitate instructing foreign lawyers to arrange for service of the court documents. There is also the problem of subsequently enforcing a judgment against a company that does not have assets within the jurisdiction.
If it is being suggested that your contract is with a Non Recognised Foreign/Joint Venture Company which does have operations within Australia, then the obligations of such a company should be underwritten by the local Australian company.
If this is not possible, or you cannot receive these assurances, you should understand that, if you need to sue that foreign Company, and should it choose not to honour its contract, then you may well have to do so in a corrupt legal system. At the very least, you may face additional costs and delay in pursuing your rights. In practice, this would mean that your legal rights would be unenforceable.
Agree on a specific position description
Has agreement being reached on your position description, duties and responsibilities, and the person to whom you report? It is within your interests that this is as specific as possible. You should not agree to any arrangement under which these components can be changed after the employer has simply “consulted” with you. By pinning the company down to a specific position description, your objective should be to minimize their discretion to change the terms and conditions of your employment.
Has agreement being reached on your salary package and all of its components as well as the tax treatment on those components? Have you discussed the salary package with an accountant specialising in expatriate tax and how this might be repackaged for your benefit?
Determine whether there is a Human Resources Policies and Procedures Manual/International Assignment Policy that will be incorporated into your expatriate employment agreement.
If this is the case, you should carefully examine its contents, its relationship to the contract of employment and which document takes priority in the event of conflict.
What is said in these policy documents may significantly affect your rights.
Understand the difference between a fixed term contract and a contract of indefinite duration and how the expatriate agreement interacts with the original contract.
A fixed term contract is one which has a fixed end date and cannot be brought to an end by the employer before the expiration of the term. This means that, if the contract is of this nature and is brought to a premature end by the employer, the executive is entitled to receive by way of damages the unexpired term of the agreement.
However, if the contract contains a termination clause entitling the employer to terminate the executive’s employment upon notice and the contract also has a fixed end date after which it expires, this does not mean that it is necessarily a fixed term contract.
It may simply mean that the contract cannot continue past the date stipulated in the contract, but at any time prior to the expiration date it can simply be terminated by the employer on giving the stipulated notice in the termination provision.
A contract of indefinite duration on the other hand simply means that there is no specified end date and that it continues on indefinitely and either party has the right to terminate the agreement upon providing notice to the other.
It is not uncommon for executives to believe that they have been “guaranteed” a minimum period of employment, only to discover on closer analysis that the contract they have signed is either of indefinite duration or, even if it does have an end date, that it enables the employer to terminate prior to the expiration of that date.
Finally, you must make sure you understand how the expatriate agreement interacts with your original contract.
Negotiate a remuneration package that makes it worth your while to assume the risks of living abroad
When negotiating a remuneration package, make sure it includes the cost of living/living away from home allowance as well as a cost of living allowance adjustment.
You should also negotiate a bonus arrangement based on clearly achievable key performance indicators that operate in a nondiscretionary way.
In other words, although there may be a bonus payable depending upon the overall performance of the company, there should nonetheless be an individual bonus that is solely confined to your own performance. This should effectively compensate you for the risk and disruption to your life in accepting the overseas appointment. The bonus should be payable irrespective of the timing of your departure from the company.
Taxation returns should be prepared at company expense and you should consider the inclusion of a “tax equalisation” clause under which you will not be penalised for paying excess tax in the host country that exceeds what you would have paid had you remained in the home country. You should take accounting advice on this issue.
Other elements of the package to consider:
Give proper consideration to what you will be returning to at the end of the assignment.
You should consider in advance the position you will be in at the conclusion of the expatriate assignment.
To what position will you be returning? And on what package?
If there is no position to return to, what rights do you have to notice and severance?
Be sure to seek legal advice during the negotiation process and before signing the expatriate employment agreement
The above checklist is not intended to be exhaustive, but will hopefully be of assistance to you in negotiating your expatriate employment agreement.
Needless to say, it is our strong recommendation that you seek legal advice throughout the negotiation process, and, in particular, before signing the agreement.