Ten Tips for Preparing Expatriate Assignment Agreements

Global mobility professionals will be well accustomed to issuing expat documents for employees being assigned overseas. It is both tempting and tempting fate to rely on standard templates for this purpose. The following points are intended to get you thinking about the specific drafting of expat assignment agreements but there is one key pointer – ask yourself what could possibly go wrong and then draft the wording to protect against it:

1. Think about the structure of the assignment. If the expat will remain employed by the home entity and only assigned or ‘seconded’ to the host (even on a long-term basis), this should be made clear in the assignment agreement and any language or practices implying employment by the host entity should be avoided (see point 9 below).

2. On the other hand, if the expat is to be employed by the overseas host and the home employment brought to an end, an assignment letter or agreement (if you enter into one at all) can be used to inform the expat of the practical arrangements for their transfer to the host entity but he or she should still be given appropriate notice of termination of their home employment and be required to enter into a new employment agreement with the host entity. Separate employment agreements for the home and host entity should generally only be maintained in exceptional circumstances (e.g. where required for immigration purposes).

3. Seek host country advice as to whether the assignment agreement needs to be submitted to the host country’s authorities for the purpose of obtaining necessary immigration permissions and whether specific wording needs to be included (or avoided) in the agreement for this purpose.  Some jurisdictions require the expat to be employed by the host entity regardless of the parties’ intention that he or she remain employed by the home entity, while others require tri-partite assignment agreements if the expat remains employed by the home entity. The assignment should, of course, be conditional on obtaining and maintaining the necessary immigration permission and the expat should be required to provide any necessary information and documentation in a timely manner.

4. Check whether the terms of the assignment agreement (particularly those relating to working hours, annual leave and overtime payments) comply with the host country’s mandatory employment laws – these will apply even if the expat is not contractually employed by the host entity. Are there any unusual legal or cultural requirements (e.g. around alcohol) which ought to be drawn expressly to the expat’s attention?

5. Is the pre-assignment employment contract adequate with regard to employee obligations to the home entity such as confidentiality, intellectual property and restrictive covenants?  If not, use the assignment as a means of requiring the expat to sign up to new terms either within a new employment contract or in the assignment agreement itself. Bear in mind, however, that these obligations are unlikely to be enforceable in the host country – the host entity may require the expat to enter into separate locally enforceable obligations (even if the expat won’t be an employee of the host entity).

6. Be sure to include provisions relating to the termination of the assignment agreement by the home entity, at the same time making it clear that the termination of the expat’s employment with the home entity will bring the assignment to an automatic end.  If you want to give the expat the ability to terminate the assignment, ensure that the agreement explains that the ability to return to employment at the home entity is subject to meeting the home and host entities’ business needs at that time and there being a suitable position for the expat to return to in the home entity.  It may help manage expectations for some indication to be given of the severance terms which would apply if (through no fault of the expat), a return to employment with the home entity at the end of the assignment proves impracticable.

7. Include provisions which clarify the effect of termination of employment or the assignment on benefits, bonuses and repatriation costs.  For example, if the expat resigns or is terminated for gross misconduct, will you be willing to pay for return flights to the home country, shipping costs and next term’s school fees? Who will be responsible for the termination costs of any property or car lease?  If any end-of-service or termination gratuity is payable locally, how does this fit within any redundancy package payable on their return to the home country?

8. In the course of seeking specialist advice on pension, tax and social security arrangements during the assignment both in the home and host countries, find out what records the expat should be required to maintain and provide and specify these in the assignment agreement. Since it is probably to the employer’s benefit that this is properly done, consider whether you will pay for tax advice to the expat for the relevant tax years and specify the conditions which apply to obtaining such advice (e.g. through a specified provider).

9. If the expat is to remain employed only by the home entity, to reduce the risk of any inference that he or she is employed by the host entity, ensure that the home entity retains ultimate control over the assignment (e.g. by maintaining some reporting lines to the home entity), that the agreement specifies that any performance management, grievance or disciplinary issues are to be dealt with by the home entity and that this happens in practice.

10. Finally, although perhaps an obvious point, try to ensure that the assignment agreement is finalised and signed off before the expat departs for their host country not least because, once the assignment has begun, your ability to negotiate additional terms will be significantly reduced!

For further information or questions on preparing expatiate documents please contact Annabel Mace, Partner at Squire Patton Boggs annabel.mace@squirepb.com

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