Being Clear in the Paperwork for Foreign Assignments Can Make All the Difference
Many employers in the United States draft offer letters and employment policies relating to compensation with an eye to the Fair Labor Standards Act (“FLSA”) and to specific state payday laws. Employers are often unaware that the FLSA does not apply outside the United States. Hence, when an employee is then transferred outside the United States, the employer could effectively bring along the FLSA, state payday laws, and U.S. contract claims for this foreign trip, unless it is made clear that the employee’s pay will be calculated on a different basis while the employee works outside the United States.
In the recent case of Rishell v. Computer Sciences Corporation, decided by the federal Fourth Circuit Court of Appeals, an offer letter that provided for traditional pay for every hour worked was held to apply even though it appears the employer had intended that the employees would become salaried employees when working outside the United States. Unfortunately for the employer, the documentation for the foreign assignment did not state that it replaced the prior offer letter’s promises regarding hourly pay, which had been included to comply with the FLSA. The court held that the employees were entitled to rely on the original offer letter and demand that they be paid at an hourly rate for all hours worked during their overseas assignment.
The employer in this case also handled all matters relating to the foreign assignment through its company in Virginia. The court concluded that Virginia law applied. The employer tried to argue that the law of Kuwait, which was actually where the employees were working, should apply. However, the company in Virginia issued all of the offer letters and foreign-assignment letters, the employees were instructed to return all signed offer letters and foreign-assignment letters to the company in Virginia, and all of the employees’ work in Kuwait was directed by individuals back in Virginia. Based on these facts, the court easily concluded that Virginia law had the most relevance to the situation and should apply.
Foreign assignments are complicated arrangements. How they are documented needs to be carefully considered in light of any other documents (offer letters, agreements, or policies) that the employee may have received while working in the United States. Employers also need to consider when they would rather not have U.S. law, or the law of a particular state in the United States, apply. Understanding the consequences of that choice is central to a successful foreign-assignment program. Not getting the paperwork correct when it comes to foreign assignments can lead to bad outcomes and unintended consequences that can undermine the effort of a business to expand internationally.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.