Challenge: Determining which countries' laws reach an expatriate or a mobile employee can be particularly tricky.
Probably the most common question of international employment law is: Which countries' employment laws apply to expatriates and other border-crossing employees? This is obviously an important question in arranging any mobile job, expatriate posting, or "secondment," but this question becomes vital when a multinational needs to fire an international employee: it has been said that a terminated expatriate or mobile employee who can "forum shop" has "powerful ammunition in negotiations over compensation." P. Frost and A. Harrison, "Company Uniform," The Lawyer (London), December 11, 2006, at 21.
To determine which countries' laws apply in international employment, start by assuming that the local employee protection laws in the host country where an international assignee works apply by force of mandatory law. Employee protection laws tend to be mandatory rules that apply by mandatory laws that apply to all who work in the host country — even foreign-citizen workers who purported to opt out of local law, such as with a choice of home-country law provision. These host-country employee protection laws with mandatory force tend to be the laws that get to the heart of the employment relationship: local laws on firing, pay, hours, rest, vacation, overtime, safety,wages, labor unions, mandatory benefits, discrimination, and (very commonly) restrictive covenant/non-compete/trade secret rules.
General Rule Applies Stateside
This general rule on the mandatory application of host-country employee protection laws may seem heavy-handed. But Americans need to remember: We impose it ourselves. Hypothetically, imagine an India software company transferring a Bangalore programmer (with a US work visa) to Silicon Valley. Imagine the programmer signs a contract calling for the law of her and her employer’s home country — India. Now imagine that after the programmer’s place of employment becomes California, she earns less than US minimum wage, she gets sexually harassed, she suffers a workplace-safety violation and her boss warns her not to sign a union card. If this programmer files claims with the US Department of Labor, the EEOC, OSHA and the NLRB (or California agencies), few California lawyers would bet on her employer's "choice-of-Indian-law clause" defense. America's federal and state public policy make void most prior waivers of employee protection laws. Just as an agreement to work for below minimum wage is void under the US Fair Labor Standards Act, a contractual selection of Indian wage law is equally void — if India's minimum wage is less than that of the FLSA.
Outside the US, it works similarly. The local employee protection laws of the host country where an expat works usually apply notwithstanding a contractual selection of home-country law. Indeed, this principle is especially significant as applied to American expats: Once a Yankee's place of employment becomes some foreign country, he almost always steps out of employment-at-will and enters a cocoon of local law protection — the "indefinite employment" regime of the host country’s vested rights, severance pay and termination protection laws.
Best Practices Tip: Assume host-country law applies, but be alert to exceptions. In some situations, both host and home countries' laws may apply.
Refinements to the General Rule
There are three important refinements to this general rule on the mandatory application of local employee protection laws: "long business trips," the "Communist and Arab" exception and "extraterritorial reach."
1. "Long business trips": Employee protection laws of a place of employment (host country) almost always govern an expat's employment relationship. But which country is the "place of employment" can sometimes be unclear — a factual question. Disputes can arise as to which country is (using the terminology in Europe's Rome convention) "habitually" the place of "work." Think of an employee only temporarily working abroad on a long business trip. Think of an expat recently arrived in a host country. Think of a mobile employee such as a flight crew, sailor, salesperson with international territory, or executive whose office is outside his residence country.
2. The "Communist and Arab" exception: A handful of countries — mostly Communist nations such as China, Cuba and Vietnam, but also including Indonesia — actually impose separate sets of employment laws on locals (versus foreigners), or at least allow inbound expats to opt out of local employment regulations. Also, certain Arab country employment laws may reach only locals or may be susceptible to choice-of-law provisions (such as minimum wage laws in the UAE and social security rules in UAE and Saudi Arabia), but these exceptions are few.
3. "Extraterritorial reach": The other side of the "employment laws are territorial" coin is that few countries presume to extend their rules to follow their citizens who leave and go work abroad. But there are some exceptions — the US being conspicuous:
US: Ever since the US Congress rapidly overturned the 1991 US Supreme Court decision in Aramco by passing the Civil Rights Act of 1991, US discrimination laws have reached American citizens who work abroad for US "controlled" multinationals, even though host-country laws simultaneously apply. For example, an American consultant fired from the Paris office of a New York company could likely bring both a French labor court claim and a US age discrimination charge — regardless of any choice-of-law provision, and even if the company considered the consultant a "local hire," not an expat. (Damages might get offset, but the French and US lawsuits are independent causes of action. Indeed, multinationals have been defending double-barreled two-country claims like this for decades.) But this doctrine is mostly confined to discrimination claims. E.g., Carnero v. Boston Scientic, 433 F.3d 1 (1st Cir. 2006), cert. den. 6/26/06 (Sarbanes-Oxley whistleblower protections do not reach abroad); US Dep't of Labor Wage and Hour Division Field Operations Handbook (5/16/02), at §10e02 (Fair Labor Standards Act does not reach abroad).
UK: Most UK citizens who work outside the UK for a UK employer are subject to the general rule and cannot invoke UK statutory rules, because the relevant UK statutes provide that they only apply to employment within the UK. Even if an employment contract calls for "English law," it will not necessarily invoke those UK statutes: It will be governed by the common law of contracts, with UK statutes coming in play only if employment is physically within the UK. Recent cases, though, carved out narrow exceptions to extend these UK statutes for certain employees working abroad who directly service a UK domestic entity (think of a foreign correspondent writing for a London newspaper) and for UK citizens stationed in a British foreign enclave (think of a UK embassy or military base). Bleuse v. MBT Transport Ltd,  UK EAT/0999/07 & EAT /0632/07; Serco v. Lawson,  UKHL 3 (House of Lords); Saggar v. Ministry of Defence,  EWCA Civ. 4133.
France: If a French expat works outside France for a French employer entity under a French contract, in some cases French employment law follows.
Venezuela: Venezuelan employment law reaches outside Venezuela to protect Venezuelan expats hired in Venezuela, but working elsewhere. Venez. Labor Code art. 78.