A decision delivered by the Argentinian National Labour Court of Appeals in 2014, and released publically in 2015,  illustrates some interesting issues in relation to the implementation and enforcement of global incentive contracts.  In particular, the case highlights the unwillingness of labour courts to apply provisions, such as choice of law clauses,  which they consider violate local public policy laws.

The Case

We will not go into the details of the case which involved an action by a former senior executive of an international telecommunications company (the plaintiff and the co-defendants respectively). The award of around USD10 million, in favour of the employee, has in itself ensured interest in the case. Although the court  specifically applied Argentinian employment law, the decision raises issues which occasionally arise in an international context.

Choice of law

Arguments by the employer that the court did not have jurisdiction to hear the case and that it should apply the law specified in the contract (in this instance, the laws of the US State of Georgia) were rejected.  In the view of the court, both the employment contact and the benefits granted to the employee under a share option plan were subject to Argentinian law.  The court held that to decide otherwise would be a violation of local law and public order: the plaintiff had provided his services in Argentina, so the application of local law was held to be mandatory.

Contractual unfairness

The court nullified a termination agreement between the executive and the employer, finding that the agreement violated public order because it was not a fair agreement between the parties, rendering the waiver of further claims by the employee invalid. The court held that it was irrelevant that the employee had worked as a senior executive and treated him as it would any employee.

Share option plans

In relation to benefits arising under a share option plan, the court held that they were to be treated as part of an executive's salary, as the benefits represented earnings and an economic benefit to the employee.