When a US organization sets out abroad and signs up staff overseas, the first obstacle it hits is
deciding what to do about employment agreements. American employers rarely embrace the
idea of tying themselves to their rank-and-file staff with legally enforceable signed contracts.
Indeed, domestic American employers disfavor, even shun, written work contracts, seeing
them as mostly unnecessary and always restrictive. This is why so few working Americans
have documented employment agreements (the exceptions tend to be some but not all senior
executives, pockets of technical and sales staff, and the small percentage of American labor
that is unionized and protected by collective bargaining agreements).
Outside the United States, though, written work contracts (or quasi-contractual “statements of
employment particulars”) are widespread, usually recommended, and often legally required.
In fact, collective and individual employment agreements play such a vital role in human
resources overseas that many foreign workers talk less in terms of having or getting a “job”
than about having or getting an “employment contract”—staff in many countries actually see
their contract as their job. Accordingly, written work agreements abroad come into play at
each stage in the employment life cycle overseas. They are obviously important when
hiring and “onboarding.” Because these documents address compensation, they become
crucial at bonus and salary review time. They also prove important when management needs
to restructure or cut back some benefit or term/condition of employment, as well as when an
employer needs to buy, sell or merge with another entity. Discipline and data privacy clauses
in employment agreements factor into internal investigations, and because these contracts
usually address severance, they factor into individual dismissals and reductions-in-force.
And employment agreements remain vital even after separation, at least when an
employer has to enforce a restrictive covenant (non-compete, non-solicit or confidentiality
provision), has to protect its intellectual property, or has to claw back money an employee
But American organizations setting off overseas may emerge from their employment-at-will
cocoon inexperienced at crafting and executing written work agreements with their
rank-and-file staff. This leaves them at an awkward strategic disadvantage and at risk of
making rookie mistakes. For example, too many American employers evade work contracts
overseas even though these documents actively protect their own interests against
opportunistic claimants. And US employers too often jump to the conclusion that they can
export a sort of homemade employment-at-will by engaging foreign staff under serial
fixed-term agreements—a problematic strategy that rarely works well in the real world.
Our discussion here offers an international field guide to both collective and individual
employment contracts, including quasi-contractual “statements of employment particulars.”
In part one we discuss the strategic role employment contracts
play in human resources overseas. In part two we inventory the
various types of work agreements overseas. Finally, in part
three we offer a survey (formatted as a chart) of the surprisingly
disparate foreign laws regulating fixed-term employment contracts
and probation clauses.
Part 1: The strategic role of employment
To explain how employment contracts work in the cross-border
context we begin by debunking a widespread misunderstanding
that sows a lot of confusion and causes countless mistakes:
Contrary to frequent assertions otherwise, there is no such thing
as a worker who has “no contract.” Every employee on Earth is
party to a binding and enforceable employment contract. Indeed,
what separates the employer/employee relationship from a
master/slave or indentured servitude relationship is the existence
of an employment agreement terminable at least by the employee.
And so the very nature of employment is inherently
contractual—employment means my offer to work in exchange
for your offer to pay me wages as consideration. Therefore, for
example, every day-laborer in Africa is party to a binding and
enforceable employment contract, as is every undocumented
illegal at-will worker in the United States, as is everyone with a
desk job, every maid, nanny, busboy, gardener, roofer and barista.
Whenever you hear about some employee said to have “no
contract,” the speaker is wrong—either mistaken or speaking
loosely, colloquially and inaccurately.
Of course, an employment contract might be for just one hour’s
work. It might be informal. It might be oral. And in the United
States, it might be terminable-at-will. But it is nevertheless a
legally binding, enforceable, full-fledged contract—just as, for
example, an oral and terminable-at-will lease is a binding
contract that holds both landlord and tenant to rights (habitable
premises) and obligations (rent).
To understand how every worker has a binding work contract,
consider the right to final pay. Even a casual, undocumented,
terminable-at-will laborer who quits or gets fired can enforce a
legal obligation, in contract, to recover wages for the last pay
period worked. If a boss withholds an ex-employee’s final paycheck
(as bosses sometimes do), the worker has a viable claim—in
contract—to collect. Under that contract, the boss must pay the
full wage rate agreed, but no more. This principle is so basic
it reaches at least back to Biblical times. In the parable of the
workers in the vineyard (Matthew 20:1-16), a “landowner…went
out early in the morning to hire” a crew of day-laborers. Throughout
that day the boss kept signing up additional work crews, engaging
candidates “standing in the marketplace doing nothing” at
9:00 a.m., noon, 3:00 p.m. and 5:00 p.m. “When evening came”
the boss paid a full “denarius” (day’s wages) to each laborer—even
the stragglers “hired about five in the afternoon.” The lesson, of
course, is that this boss’s compensation philosophy, however
unorthodox, met his contractual obligation to his first-hired
laborers, who found themselves tied to their own contracts, struck
that morning, to work that day in exchange for one denarius. The
laborers’ binding employment contracts left the quixotic boss free
to reward his later-hired crews more generously.
Stated this way, our point that every employee everywhere has
a work “contract” sounds perhaps pedantic. But this point offers
a profound lesson for any American multinational contemplating
whether, when or how to document employment agreements
abroad: The overseas employment contract question is never
about whether to offer or withhold an employment contract from
anyone, because every employee already gets a binding and
enforceable contract, anyway. Rather, overseas, the employment
contract question is a much simpler and narrower issue: Whether,
when or how to reduce existing, legally binding employment
contracts to writing.
Even so, many American bosses tenaciously cling to the strategy
of keeping their staff arrangements oral. This is because under
United States employment-at-will, employers see routine written
work contracts as simultaneously superfluous and restrictive.
Most American bosses, even in California, avoid written work
contracts (other than for some senior executives, sales, technical
and unionized staff), to keep nimble and flexible. It is a lot easier
to change terms and conditions, and to escape alleged
commitments, when nothing gets reduced to writing.
But outside American employment-at-will this logic flips on its
head. Employment law outside the US differs radically, and that
difference overturns the strategic case against reducing work
arrangements to writing. Overseas legal systems reject
employment-at-will in favor of so-called “indefinite employment”
(in the Philippines, “security of tenure”). Under indefinite
employment, a job is like a marriage in that the law binds two
parties to each other. As in a marriage, that bind is breakable—
the parties can get a “divorce”—but to allow a split, laws impose
legal process and costs. Usually laws force the richer party (the
wealthier spouse or the employer) to pay the poorer one an
indemnity (alimony or severance pay). The double threats of this
legal process and this indemnity give the richer party (wealthy
spouse, boss) a strategic incentive to cut a deal up front
(prenuptial agreement, employment agreement) spelling out the
terms of both the relationship and any eventual dissolution.
Of course, that deal will not be worth much unless the parties
write it up—a mere oral prenuptial agreement or oral employment
agreement may not help the party later trying to enforce it.
A separate reason why written work contracts are so helpful
abroad is because when an employment dispute flares up overseas, the employer tends to bear the burden of proof. If a
worker claims his boss once promised him, say, an extra month’s
vacation, a huge bonus and triple severance pay, how does a boss
disprove that? The best way to rebut a fabricated or mistaken
allegation of an employer commitment is to invoke the text of a
thorough, non-corroborating written employment contract.
For these reasons, written employment agreements are almost
always a best practice outside the United States. A Canadian law
firm has said that a “written employment contract is one of
the most effective tools an employer has to quantify and
contain employment-related liabilities and expectations.”
(Sherrard Kuzz LLP, Management Counsel, 6/08)
In addition to this strategic case for putting overseas employment
contracts in writing, an even more compelling reason to document
foreign work relationships is legal compliance. Many (although far
from all) jurisdictions actively require that work contracts be written
up or at least documented as quasi-contractual “statements of
employment particulars.” A Chinese law says, simply, “a written
employment contract shall be concluded in the establishment of
an employment relationship.” (Employment Contract Law of the
People’s Republic of China, 2008, art. 10) The entire European Union
requires written employment agreements or statements, as do
Mexico and Qatar. (EU directive 91/533/EEC; Mexico Labor Code
art. 24; Qatar Labor Law no. 14  at art. 38) Other jurisdictions
that require written work contracts or statements include Albania,
Bahrain, Chile, Costa Rica, Egypt, Ghana, Guatemala, Indonesia,
Kenya, Korea, Kosovo, Nepal, Nicaragua, Nigeria, Oman, Russia,
Tanzania, Uganda, Vietnam and many others. These jurisdictions
impose legal penalties if an employer keeps its employment
arrangements oral. Granted, the fines for failing to write up work
agreements are usually fairly low, at least on a per-employee basis
(in Bahrain, for example, the fine is US$530 to US$1,325)—but
some places impose steep penalties (for example, in Albania,
25 months’ pay at minimum wage).
■■ Oral contract jurisdictions: While many countries force
employers to write up their employment arrangements, perhaps
an equal or greater number of jurisdictions do not. Just keeping
to the first three letters of the alphabet, countries that tolerate
oral employment arrangements include Afghanistan, Angola,
Argentina, Australia, Benin, Brazil, Burkina Faso, Canada,
Colombia and others.
Part 2: Types of written employment
Understanding the strategic and compliance advantage that
written work contracts offer outside the United States, the
question becomes: How do employers strategically document
their overseas employment arrangements? That is, what are the
various kinds of employment agreements, and how do they work?
Written employment contracts (and statements) come in various
types, but those types split into two broad categories—collective
Collective employment agreements
In America, for practical purposes the only kind of labor
representative organization is the labor union. So American
collective bargaining agreements always tend to involve unions.
US labor law makes unions American workers’ only viable choice
for workplace representation because US labor law is skeptical of
employer motives. US labor law assumes bosses given the
chance will infiltrate and corrupt worker groups, and so US law
forbids employers from “dominat[ing] or interfering with the
formation or administration of any labor organization,” even from
contributing any “financial or other support.” (National Labor
Relations Act §8(a)(2), 29 USC §158(a)(2)) This blunt rule
succeeds at keeping American worker representatives fiercely
independent of employers—and it also, of course, outlaws
management sponsored and funded worker bargaining groups.
Not so abroad. Foreign governments exploit the fact that
employers are richer and better organized than workers by saddling
management with the responsibility to structure and fund in-house
worker groups—even groups empowered to bargain with
management over terms and conditions of employment and
grievances. So outside the United States, in addition to trade unions,
workers band together in other bargaining groups that employers
themselves have to organize, structure and even fund (groups that
stateside would be flatly illegal employer “dominat[ed]” labor
organizations). These other worker representatives include “works
councils” at various levels, health and safety committees, “workers’
committees,” “joint committees,” and ombudsmen who advocate
Where local labor law authorizes more than one kind of employee
representative, employers must bargain—and ultimately enter into
agreements with—all of them. Subject to quirks of each national
system and depending on customs within each workplace, these
various labor representatives usually have power to strike deals
with the employer or its bargaining agent, deals the parties often
go on to reduce to writing. These writings are collective bargaining
agreements. They fall into two categories: employer privity
agreements and sectoral agreements.
■■ Employer privity agreements: When an employer signs a
contract with its own collective bargaining representative
(union, works council, health and safety committee, workers’
committee, joint committee, ombudsman), the parties bound to
that agreement are, obviously, the employer and the bargaining
agent themselves. Usually but not always, the bargaining agent’s
commitment binds individual employees, too. These direct collective labor accords range from broad framework agreements
that set out general terms and conditions of employment for the
day-to-day workplace (grievance resolution procedures, pay scales
and the like) to ad hoc, one-off resolutions of specific grievances
or issues (agreements accepting pay cuts, agreements letting the
employer outsource a function). And when management needs
to do a reduction-in-force, agreements with labor representatives
include so-called “social plans” and similar accords that set out
how the layoffs will work. All these various labor agreements
between management and employee representatives are
enforceable as contracts (except in England; for some
reason England presumes collective labor agreements are
non-contractual). (UK Trade Union and Labour Relations
(Consolidation) Act 1992, art. 179)
■■ Sectoral agreements: In countries from France, Germany and
Spain to Argentina, Brazil and beyond, trade unions somehow
convinced their governments to confer on them the immense
power to negotiate collective agreements with employer
bargaining groups that apply at the regional or national “level.”
This means these labor contracts actually bind an entire industry
sector (say, automobile production, telecommunications, media,
retail)—even non-parties, non-signatory employers and nonunion
member workers. These so-called “sectoral” agreements
typically require every employer in the given industry to pay
higher wage rates, richer benefits, extra vacation, premium
severance pay or other enhancements over statutory minimums.
This sectoral collective agreement system, not surprisingly,
bewilders and blindsides American headquarters because it is
so fundamentally un-American—parties get bound to so-called
“agreements” that they not only never have agreed to, but that
they had no voice whatsoever in making.
Individual employment agreements
Besides the collective agreement, the other kind of written
employment contract is of course the individual agreement
between an employer and a single employee. Individual work
agreements raise issues of both form (drafting and execution
formalities) and substance (content and term). The rest of our
discussion addresses the form and substance of individual
employment agreements outside the United States.
Form: Drafting and execution formalities
When employers setting out abroad confront individual
employment agreements, they ask about contract form. What
should employment contracts look like and how should they get
duly executed? But that is the wrong question because it assumes
overseas employment commitments run in both directions, like
business commitments in commercial contracts. Yet employmentcontext
commitments tend to be a one-way street running the
employees’ way. Legal systems abroad impose a double standard
on enforceability of employer versus employee commitments:
On one hand, foreign laws tend to hold bosses to most all
commitments to their staff, even promises made casually,
tentatively, orally or by custom and practice. (See our Global HR
Hot Topic of Dec. 2013) Indeed, France will actually force an
employer to make good on employee-favorable provisions buried in
confidential internal management guidelines never meant for
employee distribution. On the other hand, laws in most
jurisdictions let workers escape their own oral, emailed and even
written promises made to management, unless attested to in a
formally executed contract—and not always even then. Many
countries will hold a boss to its promise, for example, to give
employees a raise, end-of-year bonus, reduced work schedule or
extra vacation benefit, regardless of whether the boss made that
promise orally, in a casual email, in an unsigned “statement of
employment particulars” or in a formally executed contract. Yet
these same jurisdictions will often let an employee evade an oral,
emailed or casually-written promise to the boss—for example, an
employee’s casual agreement to reimburse damage he caused, to
give the boss title to IP he created, to refrain from competing after
he quits, or to release accrued overtime pay claims. An employer
that wants to hold workers to commitments like these better get
formal, duly executed contracts signed, sealed and delivered
pursuant to law.
So the question of how to document a work contract morphs into
a somewhat different question: How does a boss bind a worker
to commitments made to the employer? To answer that question,
look at the employment contract execution formalities in
the relevant jurisdiction. Check for four issues: contract
format/execution; language; electronic signatures/imaging;
and appendices/amendments. Have employees memorialize their
commitments in documents that meet these formalities.
■■ Contract format and execution: Written employment contracts
come in various formats. Sometimes they are simply casual
offer letters, offer emails, or electronic documents executed
electronically with an “I accept” mouse click, never reduced to
paper. In the European Union, Tanzania and elsewhere, laws
bind employers to unsigned “statements of employment
particulars” they give to staff. At the other end of this spectrum
are employment contracts with all the bells, whistles and
formalities of negotiated business accords—“whereas” clauses,
definitions sections, Roman numerals, wet-ink signatures
witnessed, authenticated, notarized—sometimes even filed
with a government agency.
The ideal format for making a work agreement fully enforceable
against an employee depends on the importance of the
employee’s commitments in the agreement, as well as on the
local jurisdiction’s law and practices for contract execution. In a
few countries employers have to write individual employment
agreements onto government-issued forms, and then file those
forms with a local labor agency. Some jurisdictions (Central America, Dubai Free Trade Zone, Ecuador, Oman, others) require
filing individual work agreements with government labor offices,
although not necessarily on government forms. Elsewhere,
though, employers can use whatever contract format and
execution practices work in the local jurisdiction to bind parties
to their commitments.
■■ Language: What language an employment contract gets written
up in is rarely a big issue for local domestic employers, but
employment agreement language can be a headache for
US-based multinationals, especially those that have designated
English as their official “company language.” American
organizations prefer English, but foreign work contracts and
statements need be written in a language that renders them
enforceable. Judges in all countries can be hostile to even
technically enforceable foreign-language accords. And contracts
are never enforceable in a language one party cannot be proven
to understand. Imagine, for example, a Japanese employer
doing business in Kentucky and having its local Kentucky staff
sign Japanese-language acknowledgements. No Kentucky judge
would enforce those. For the same reason, expect Japanese
and other judges to be reluctant to enforce local employeesigned
agreements in English.
Beyond intelligibility to the parties, some jurisdictions flatly
require drafting employment agreements in the native
language—even if both employer and employee speak, say,
perfect English. (See our Global HR Hot Topic of Nov. 2011) And
the jurisdictions like Central America, Dubai Free Trade Zone,
Ecuador and Oman that require filing work contracts with a
government labor office effectively require local language, if only
because government labor agencies (at least outside Scandinavia)
reject foreign-languages filings. (No one expects the US EEOC or
NLRB to process filings in, say, Arabic or Dutch.)
Where law affirmatively requires employment contracts in the
local language, American multinationals usually like to format
agreements dual-language/dual-column. This is a good
practice except where work agreements need be filed with
the government. Whenever an employment dispute winds up in
local court, expect the local-language version to control—even
if the contract has an “English-supersedes” clause.
■■ Electronic signatures and imaging: In our 21st-century high-tech
world, multinationals adopt sophisticated “paperless office”
platforms like PeopleDoc that electronically warehouse personnel
files, human resources documents and employment contracts.
France and some other countries offer electronic signature
protocols and analogs to the common law “best evidence” rule
that facilitate electronically executing and storing HR documents,
including perhaps even employment contracts. But speaking
globally and speaking of employment contracts specifically (as
distinct from ancillary worker-ratified HR documents like tax
forms, acknowledgements and benefits enrollments), the safest
course in many countries remains executing and retaining paper
wet-ink-signed original employment contracts. An electronic
signature or even a printed-up pdf might not be admissible
evidence when an organization later petitions a local court to hold
an employee to contractual commitments—especially in civil law
countries and especially in disputes over restrictive covenants,
IP ownership assignments, employee debt instruments and
compensation clawbacks. So even an organization that stores all
its HR documents electronically might consider an exception for
original employment agreements, particularly in formalistic civil
law systems that emphasize document-execution formalities
without updated evidence rules for authenticating electronic
signatures and paperless images. That said, in jurisdictions like
Central America, Dubai Free Trade Zone, Ecuador and Oman that
require filing employment contracts with government agencies,
employers might destroy their paper employment agreements if
government acts as the custodian of originals.
■■ Appendices and amendments: We have been talking about an
employment contract as if it is a single, self-contained document.
But what about ancillary, separate or later arrangements between
employer and employee, like employment contract amendments,
separate restrictive covenants, free-standing IP assignment
agreements, subsequent expatriate assignment letters,
employee-acknowledged work rules/handbooks/codes of
conduct, employee consents/waivers, emails and letters changing
job title/position/pay rate, new employee benefits, stock option
grants, employee loan documents, consents to claw back
compensation and releases of claims? Do these documents rise
to the level of amendments that change an employee’s contract?
Or are they somehow separate and lesser documents?
A rule of thumb is that an employer should execute as a
full-blown employment contract any ancillary HR arrangement
that it might later need to prove against an employee—for
example, documentation of a material downgrade like a pay
cut, demotion, extra work assignment, job transfer, restrictive
covenant, IP assignment, debt instrument or clawback
acknowledgement. Memorialize these downgrades in
documents executed like employment-agreements-in-chief.
Cross-reference (or replace and revoke) the parties’ original
employment agreement, and file and track these amendments
along with the employee’s main agreement. (Some employee
debt instruments need even additional formalities, as negotiable
instruments, as do some employee releases.) On the other
hand, vested rights rules usually make job upgrades (pay
raises, promotions, relaxations in work hours and job duties)
enforceable against the employer anyway, even if not
documented as formally executed contract amendments.
(See our Global HR Hot Topic of Dec. 2013)
Substance: Content and term
Having discussed technicalities for formatting and executing
individual work agreements, we now address the substance
and content of employment contracts. What should individual
employment contracts say? Which topics should they address and which should they omit? How can an employer craft employment
agreements to maximize flexibility? And what about term?
Always begin the employment agreement content inquiry by
checking whether the jurisdiction in question is one of those we
discussed that force employers to enter written employment
agreements or statements. In those places, the same law that
requires written employment contracts or statements almost
always sets out a list of topics that the required work agreements
or statements have to address. Indeed, some countries like Japan,
do not mandate written employment contracts in the first
instance but nevertheless impose a list of topics that any written
employment agreement must cover, if the employer and employee
choose to enter one. (Japan Labor Standards Act art. 15.1;
Enforcement Regs. art. 5) Always be sure a written employment
contract addresses each statutorily mandated topic. The statutory
topics tend to be the “usual suspects”—job title, place of work,
pay rate, office hours, termination procedures, contract term and
the like. But a few jurisdictions get more granular and affirmatively
require that work agreements address some unexpected and
peripheral topics like frequency of payday (EU directive 91/533/
EEC at art. 2(2)(h)), expatriate assignment status (EU directive
91/533/EEC art. 4) and taxpayer identification number (required
in Bahrain, Indonesia, Costa Rica, Guatemala, Russia and
elsewhere). Vietnam requires work contracts somehow disclose
“safety and hygiene conditions.” Costa Rica and Mexico for some
reason require work contracts disclose the employee’s gender,
nationality and marital status. And Bahrain, Indonesia, Oman and
jurisdictions apparently unconcerned about age discrimination
require that employment contracts divulge employee date of birth.
(See our Global HR Hot Topic of Sept. 2013)
Otherwise, work contracts can cover whatever topics the parties
want. Obviously an employer should be sure to document all
matters it has a business or human resources reason to cover. This
requires attention to local nuance. For example, Canadian and
Jamaican employers should quantify “common law notice.” English
employers should document employee consents to transfers and
office moves, and employee opt-outs of England’s divisive optional
statutory cap on hours. Of course, in all countries written
employment agreements or addenda need to document restrictive
covenants like non-competes, non-solicit of customers and
employee confidentiality (see our Global HR Hot Topic of June 2012),
IP invention assignment agreements, employee loans and payments
subject to employer clawback, and any fixed term or probation.
A good practice is for employment agreements to address
compensation, benefits and severance pay specifically enough to
rebut later employee claims of orally-promised enhancements. But
in documenting compensation, be careful when articulating bonus
eligibility. Many countries’ laws interpret ostensibly discretionary
bonus provisions to be mandatory or (as in England) subject to a
“reasonable discretion” standard. Also consider future cutbacks:
Any employer that might later need to reduce compensation,
benefits or terms/conditions of employment should have its work
contracts expressly cede permission for the possible cuts.
(See our Global HR Hot Topic of Dec. 2013)
This brings us to the controversial issue of employment contract
term. Outside the United States, employers are rarely free to make
their work contracts terminable-at-will. (See our Global HR Hot
Topic of Dec. 2012) This restriction makes the issue of contract
term all the more important. There are three possible employment
contract terms: indefinite term, temporary or fixed term,
■■ Indefinite term contracts: When a foreign employment
contract is open-ended as to term with no end date, its term is
“indefinite” (sometimes loosely called “permanent”)—the
employee keeps his job until he quits or gets legally fired.
Because laws abroad restrict employers from firing without
demonstrable good cause, American bosses sometimes get the
clever idea to craft a contractual “good cause” definition that
picks up as many infractions as possible—harassment, safety
violations, tardiness, poor performance, breach of code of
conduct, maybe even messiness, bad attitude and lack of work.
Unfortunately, foreign legal systems rarely defer to wide-open
contractual clauses that define good cause so broadly. Instead,
jurisdictions tend to apply their own, narrower definitions. (See
our Global HR Hot Topic of Feb. 2013)
And yet certain employment contract clauses can add texture
to the way indefinite term employment might end. We already
mentioned that Canada, Jamaica and other jurisdictions give
employers a keen incentive to quantify pre-dismissal “common
law” notice, which in those countries substitutes for severance
pay. Well-drafted notice clauses let the employer pay out notice
in lieu, wholly or partially (although pay-in-lieu clauses can be
void in Switzerland and elsewhere). “Garden leave” provisions
that let employers relieve workers of duty before separation are
routine in some markets, where they act like non-competes—
albeit at full base pay. And employers in England and elsewhere
often favor imposing months or even years-long pre-quit notice
provisions—but this strategy is less attractive to US employers
that prefer to push exiting lame duck workers who have
resigned off the payroll, off the headcount, and out the door.
Temporary or fixed-term contracts: Foreign legal systems
actively impose firing restrictions to protect indefinite term
workers. (See our Global HR Hot Topic of May 2013) To make
firings easier, cheaper and faster, American employers
sometimes get the clever idea of hiring overseas staff for
temporary, short, repeating fixed terms—if not daily or weekly,
then monthly, annually, or every two years or so. Or else
employers might tie employment term to the duration of a
single current project. This way the employer might avoid firings
altogether—a boss inclined to dismiss a worker would merely stop renewing the serially rolled-over chain of employment
contracts as soon as the current one expires. But this strategy
usually fails, at least after an employee has been on board for
a while. Obviously the jurisdictions that affirmatively grant
severance protections to indefinite term workers have a
compelling policy interest to hold bosses to their severance
obligations by not letting them exploit fixed-term contracts.
Therefore, very many (although not quite all) jurisdictions
regulate fixed-term work contracts. For example, the European
Union requires all its member states to rein in and cap fixedterm
contracts. (EU Directive 1999/70/EC) While fixed-term
agreements are now becoming more common in Europe and
Japan, European and Japanese courts are actually striking many
of them down. (E.g., German Federal Labor Court Decisions
9 AZR 51/13 (Dec. 12, 2013); 7 ABR 91/11 (July 10, 2013))
Many jurisdictions prohibit fixed-term employment agreements
altogether unless the job itself has a built-in expiration or is
inherently temporary (apprenticeship, seasonal work, filling in
for someone on leave, actor in a play). In addition, laws in many
places flatly cap serial fixed-term contract rollovers: After an
employee reaches the cap, employment automatically becomes
indefinite-term by operation of law, and any purported
contractual end date becomes instantly void. The chart below
offers examples of many countries’ regulations of fixed-term
Another danger with fixed-term agreements is that firing a
fixed-term worker early can get much more expensive than
dismissing similarly situated recently hired indefinite-term staff.
Law in many countries accelerates wages owed to the end of
the fixed term, and in countries like Honduras, the employer
cannot even invoke a duty-to-mitigate defense crediting wages
that the early-fired employee might earn on a next job.
Employers often find themselves writing much bigger severance
checks to recently hired fixed-term employees than would be
owed had the staff been indefinite term.
Fixed-term work agreements also raise bureaucratic obligations.
Countries from Angola to Peru and beyond require employers to
file or register with the government fixed-term employment
contracts—but not indefinite-term agreements. (Also,
jurisdictions like Colombia affirmatively require that fixed-term,
not indefinite term, agreements be in writing—but for obvious
reasons, fixed terms should always be written and signed by the
■■ Probationary contracts: Another employer strategy for
reserving some freedom to fire in indefinite employment
countries, at least for a while, is to put new hires on probation,
keeping them terminable-at-will as long as possible. Many
countries do indeed let an employer hire staff into some sort
of probationary status or trial period. But legal systems do not
want employers to abuse open-ended “probation” to evade
statutory severance protections, so laws tend to regulate
how long probation can run and even how and when a boss
can fire a probationary worker. A recent New Zealand case
awarded thousands of dollars in wrongful dismissal damages
to a fast food worker terminated at the end of a mere
three-hour probation. (Salad Bowl v. Howe-Thornley, 
NZEmpC152CRC (10/13)). Countries like Bahrain, China,
Japan and Russia impose limits on the reasons for dismissing
probationary workers. Probation in Costa Rica, Pakistan and
South Africa is for the most part illusory because probationary
workers get essentially the same severance protections as
non-probationary staff. The chart below offers examples of many
countries’ probation regulations.
Part 3: Laws regulating fixed-term employment contracts and probation clauses
This chart offers a broad summary of laws regulating fixed-term employment and probation, as of 2013. Check local law for nuances and updates.
Jurisdiction Fixed-term employment restrictions (where job is not inherently temporary) Maximum probation period
Angola Fixed-terms disfavored unless job inherently temporary. Max. term 36 mos. Up to 6 mos., but for high-level
Argentina Fixed-term OK only if job inherently temporary. Max. period 5 yrs. Successive renewals may
make term void. Termination requires 1 – 2 mos. notice. Fixed-term employee fired without
cause can win severance pay (usually full pay till end of term).
3 mos.; termination requires 15 days’
notice or severance pay.
Australia No limit on fixed-term, but if the reason for fixed-term is to avoid severance restrictions,
dismissal notice, or layoff rights, then employment will be treated as indefinite.
Not regulated; first 6 mos. of
employment is at-will anyway.
Austria No limit, but successive renewals may void the end date. Early termination only
if in contract.
Bahrain 5-year cap including rollovers. 3 mos.; 6 mos. for some jobs.
Termination cannot be arbitrary.
Jurisdiction Fixed-term employment restrictions (where job is not inherently temporary) Maximum probation period
Brazil Fixed-term OK only if job inherently temporary. Max. 2-year term. If terminated early,
employee gets severance pay of 50% of compensation till end of term. Early termination
clauses introduce complexities and might be best avoided.
3 mos. or 1 turnover.
Canada Specifics differ by province but generally no caps. Early termination accelerates pay until end
of term absent early termination clause. Unless contract has early termination clause,
employee is entitled to be employed for the whole term. Statutory obligation to give notice
No limit. First 3 mos. of employment
is at-will anyway.
Chile Total max. period 1 yr.; employees with a professional or technical degree granted by a
state-recognized institution: max. period 2 yrs.
Labor code does not allow probation
except 2 wks. for domestic workers.
China 10-yr. limit and limit of 2 rolled-over fixed-terms (applicable to Chinese citizens who work for
a subsidiary, not for a “representative office”).
Max. probation up to 6 mos.
varies with length of contract.
Termination during probation subject
to some restrictions.
Colombia If term less than 1 yr., then cap of 3 contracts total. Otherwise, cap of 3 yrs. per contract,
but no cap on rollovers.
2 mos. in indefinite contracts or 1/5 of
term in fixed-term.
Costa Rica Fixed-term OK only if job inherently temporary. Max. period 1 yr. generally, 5 yrs. for special
technical services. OK to terminate early with notice and severance pay. If employee stays
employed after expiration, contract becomes indefinite.
3 mos., but early termination has
same penalties as indefinite.
Cyprus Max. 30 mos. 26 wks.; can be extended to max. of
Denmark No set period.Too many rollovers void end date. Eastern High Court decision of
June 28, 2013 found 4 renewals excessive.
Blue collar: no cap; white collar;
3 mos.; 14-day notice of termination.
Not regulated. First 3 mos. of employment are at-will
anyway. Probation not allowed.
Ecuador 2 year cap including rollovers. If employee stays employed after expiration, contract becomes
3 mos. Cap of 15% of workforce on
probation, except start-ups.
Egypt No restrictions; if early terminated without cause, employee gets 2+ mos., pay per
yr. of service.
El Salvador Fixed-term OK only if job inherently temporary and contract terminates with end of
temporary work; no early termination without cause.
30 days; no extensions.
Directive 1999/70/EC requires EU states to cap fixed-terms as to duration and renewals
(see the directive’s annex, clause 5). Check EU member state law for specifics.
Probation not EU-regulated. Check
member state law.
Finland Fixed term OK only where inherently temporary. Supreme Court is strict on “inherently
temporary” (case #KK0 2012:10). No set limit on terms; can be terminated by notice
after 5 yrs.
4 mos.; 6 mos. if employer provides
4 mos. training; cannot exceed 50% of
fixed-term contract under 8 mos.
France Fixed-term OK only if job inherently temporary; fixed-term limited to 18 mos. +1 renewal up
to 24 mos. under certain conditions (subject to some exceptions). No cap where employee
replaces someone on leave.
2 mos. for most workers; 3 mos. for
supervisors/technicians; 4 mos. for
executives; renewable once for same
period if per collective agreement.
Germany Fixed-term OK only if job inherently temporary. No cap, but longer is harder to justify. Where
fixed-term contract meets formal requirements and where job is not inherently temporary:
Max. 2 yrs. or 3 renewals within 2 yrs. Other fixed-terms OK under specific exceptions.
Max. 6 mos. 2-wks. notice
necessary before termination
(unless otherwise agreed).
Greece Max. 3 yrs. and 3 renewals within those 3 yrs. Contracts with up to 45-day break between
them are considered renewals.
Max. 1 yr. “trial period.”
Guatemala Fixed-term OK only if job inherently temporary; no cap. 2 mos.
Jurisdiction Fixed-term employment restrictions (where job is not inherently temporary) Maximum probation period
Honduras Fixed-term OK only if job inherently temporary; no cap. 2 mos.
India Fixed-term OK only if job inherently temporary. Rollovers void for blue collar “workman.” No set limit, 3 mos. to 1 yr. typical.
Indonesia Fixed-term OK only if job inherently temporary. Max. initial term 2 yrs., renewable once for
1 yr. If formalities not met, can be deemed indefinite. Severance pay in early termination is
100% of wage to end of term.
Israel In practical effect, fixed terms must total less than 1 year (full severance pay is owed to nominally
fixed-term employees dismissed either after 1 year or, per statute, “shortly before the end of the
first year” where dismissal is “deemed to have been intended to avoid the obligation to pay
No max. term. During probation,
dismissal is subject to some limits.
Italy New employees: no justification needed for 1 yr. “Continuation period” of 50 days OK with
extra pay. Renewals and existing employees: job must be inherently temporary, max. 3 yrs.,
including extensions; executives: max. 5 yrs., no justification needed.
6 mos. or less per
Japan Per Labour Contract Act amendment of Apr. 2013, cap is 5 yrs. or 1 renewal. Employee then
must request “conversion to unlimited term.”
No max. term. Usually 3 – 6 mos.;
extensions OK only per specific rules/
agreement; termination during
probation subject to restrictions.
Kazakhstan Fixed-term OK only if job inherently temporary. Generally 1 yr. max. term. Fixed-term for
CEO/President needs authorization in contract or bylaws.
3 mos.; no probation for recent
Luxembourg Fixed-term OK only if job inherently temporary. Max. 2 renewals in 2 yrs. 3 mos.; 6 mos. for professionals;
12 mos. for high earners.
Mexico Fixed-term up to 180 days OK only for high-level positions. Otherwise, fixed term OK only if
job inherently temporary. Contract must be for duration of the temporary task. Where
fixed-term contract early terminated without cause, employee can claim unfair dismissal and
win reinstatement or damages.
30 days; 90 or 180 days for
management and other
Netherlands Max. 3 years (after 7/15 becomes 2 yrs.) and 2 renewals (except as to employees younger
than 27 yrs. old: 4 yrs. and max. 3 renewals within 4 yrs.) but if 3+ mo. break (after
7/15 becomes 6+ mo. break) within 3 yrs., the 3-yr. period restarts. Fixed-term contract can
be terminated early only with permission of court or the UWVWerkbedrijf agency, or if
parties agreed on early termination clause. Employer must give 1 mo. non-renewal notice
1 mo. for fixed-term contracts up to
2 yrs.; 2 mos. for others. After 7/15,
no probation in fixed term.
New Zealand Fixed-term OK only if job inherently temporary. No statutory cap. No max. term but “trial periods”
Nicaragua No max. term but max. 3 renewals. Can terminate early for justifiable cause only. 30 days; no probation for
Nigeria No restrictions, although must be in writing. Not regulated; should be in writing.
Oman No cap, but after initial term, rollovers must be for inherently temporary work only and term
must be till the end of the task.
3 mos. Give 7 days’ termination notice.
Pakistan No restrictions, but term is illusory in that terminated fixed-term employee entitled to same
termination compensation as indefinite-term employee.
Poland Under temporary 2009 Anti-Crisis Law, capped at 24 months. Otherwise no cap, but
overlong term can be held indefinite. Employment of less than 6 mos. cannot be early
terminated except for gross misconduct. After 6 mos., either party can terminate with
2 wks. notice if employee had agreed to 2-wk. termination in writing.
3 mos.; early termination requires
notice of 3 work days to 2 wks.
Jurisdiction Fixed-term employment restrictions (where job is not inherently temporary) Maximum probation period
Portugal Fixed-term OK only if job inherently temporary. Max. term 3 yrs., including max. 3 renewals
within the 3 yrs.
3 mos.; 6 mos. for technical/high-level
employees; 8 mos. for directors/top
officers. Fixed-term agmts.: under
6 mos., 15 days; 6+ mos., 30 days.
Romania Fixed-term OK only if job inherently temporary; max. 3 yrs. (unless substituting for employee
3 mos. for non-management; 4 mos.
for management; other for fixed-term.
Russia Fixed-term OK only if job inherently temporary, where employer is small business or where
employee works high-level position (management, director, chief accountant). Max. 5 yrs.
Early termination not allowed unless for cause.
3 mos.; 6 mos. for high-level officers;
termination before end of probation
OK only for poor performance and
after 3-day notice.
Singapore Not regulated. No max. 1 – 3 mos. is typical.
South Africa Fixed-terms disfavored unless job inherently temporary. Agreement may be deemed
indefinite (and “non-renewal” may be deemed unfair termination) if employee had
reasonable expectation of renewal.
No cap; practice is up to 6 mos.
But “probation” is arguably
illusory—employer must respect
Spain Fixed-term agreement must fit one of four categories:
■■ Temporary contract for specific task/service: for duration of task
■■ Seasonal/special market conditions contract: up to 6 mos.
■■ Training/work experience agreements: 1 to 3 yrs. (can be reduced to 6 mos. by
■■ Substitution for on-leave employee: for duration of principal employee’s absence.
Fixed-term void after employee works 24+ mos. within 30-mo. period under 2+
2 mos.; 6 mos. for college grads; 1 yr.
for employers of up to 50 employees.
Sweden Fixed-term OK only if job inherently temporary. Max. 2 yrs. within a 5-yr. period. Max. 6 mos.
Switzerland No max. term but max. 1 renewal. After 10 yrs., either party can terminate with
6 mos.’ notice.
First 1 mo. of employment is at-will;
parties can agree to 3 mos. or
sometimes 6 mos.
Taiwan Fixed-term OK only if job fits into set inherently temporary categories; max. term depends
on type of work, but cap is 1 yr.
UAE Max. 4 yrs. No cap on rollovers and no cap for Dubai International Financial Center
Max. 6 mos.; no cap for
UK Max. 4 yrs. unless longer term objectively justified, but employees with 2+ yrs.’ service
protected against unfair dismissal. Early termination or non-renewal actionable as unfair
dismissal unless employer follows fair dismissal procedures.
No cap; practice is 6 mos. or less.
US Generally no restrictions as to term or severance at end of term (state laws may restrict
Probation not necessary where
Venezuela Fixed-term up to 1 yr. OK only if job inherently temporary. 3 mos.
Vietnam Max. 3-yr. term including max. 1 renewal. Employee entitled to 30-day early termination
notice. After 1 yr., employee gets severance pay unless terminated for just cause.
60 days for technical jobs; 30 days
for mid-level; 6 days for others.
Probationary wage must be 85+%
of “scale” wage.