Proskauer Rose International Practice Guide Proskauer Rose LLP |
      Proskauer on International Litigation and Arbitration:
       Managing, Resolving, and Avoiding Cross-Border Business or Regulatory Disputes
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  1. Overview

    The application of U.S. federal employment law operates under the general presumption that U.S. laws will not be presumed to apply beyond U.S. territorial jurisdiction unless the U.S. Congress clearly has intended such extraterritorial reach. E.E.O.C. v. Arabian American Oil Co., 499 U.S. 244 (1991).

  2. U.S. Anti-Discrimination Laws
    1. Civil Rights Act of 1866 (42 U.S.C. § 1981): Section 1981 prohibits national origin/race discrimination, and possibly citizen-based discrimination, in the making and enforcement of contracts.
      1. The Second Circuit is the only federal appellate court to have addressed, in a published decision, whether Section 1981 applies beyond the territorial jurisdiction of the United States. In Ofori-Tenkorang v. Am. Int’l Group, Inc., 460 F.3d 296 (2d Cir. 2006), the Second Circuit held that Section 1981 has no extraterritorial application.
      2. U.S. district courts that have considered the question also agree that Section 1981 does not have extraterritorial effect. See e.g., Ortiz-Bou v. Universidad Autonoma de Guadalajara, 382 F. Supp. 2d 293 (D.P.R. 2005).
    2. Title VII of the Civil Rights Act of 1964 (42 U.S.C. §§ 2000e et seq.): Title VII prohibits discrimination with respect to employment on the basis of an individual’s race, color, religion, sex, or national origin. An amendment to Title VII also prohibits discrimination on the basis of pregnancy.
      1. Originally, no extraterritorial application: In E.E.O.C. v. Arabian Am. Oil Co., 499 U.S. 244 (1991), the Court held that the language of Title VII failed to demonstrate affirmative congressional intent to apply Title VII extraterritorially.
      2. Post-1991, limited extraterritorial application: Following the Aramco decision, the U.S. Congress enacted section 109 of the Civil Rights Act of 1991 extending application of Title VII beyond the U.S. in certain situations to U.S. citizens employed abroad.
        1. U.S. citizens employed outside U.S. by U.S. firms: Title VII applies.
        2. U.S. citizens employed outside U.S. by non-U.S. firms: Title VII applies only if the non-U.S. employer is shown to be under the “control” of a U.S. firm. Four factors are considered in determining whether there is sufficient “control”:
          1. Interrelation of Operations
          2. Common Management
          3. Centralized Control of Labor Relations
          4. Common Ownership or Financial Control of the Employer and the non-U.S. Corporation

            Practice Tip: The presence of all four criteria is not required, as the courts will evaluate all of the circumstances of a particular case. See, e.g., Radio & Television Broad. Technicians Local 1264 v. Broadcast Serv., Mobile Inc., 380 U.S. 255, 85 S. Ct. 876 (1965) (per curiam). However, the EEOC guidelines strongly suggest that the place of incorporation will control the issue of whether an entity is considered a U.S. employer. Enforcement Guidance (BNA) N:2405-06.

        3. Employees of non-U.S. employers working abroad: Title VII does not apply to employees of non-U.S. firms where the non-U.S. firm is not controlled by a U.S. entity.
        4. Non-U.S. citizens working abroad: Title VII does not apply regardless of whether the employer is a U.S. firm or controlled by a U.S. firm. 42 U.S.C. § 2000e-1(a).
      3. Even where otherwise applicable to employees abroad, Title VII contains an exemption if compliance with U.S. law would cause a company to violate the law of the country in which its workplace is located.
    3. Age Discrimination in Employment Act, 29 U.S.C. §§ 621-634 (ADEA): The ADEA prohibits employers from discriminating against employees or prospective employees aged forty or older.
      1. Limited extraterritorial application similar to Title VII above.
        1. U.S. citizens working outside the U.S. for U.S. firm: ADEA applies. 29 U.S.C. § 623(h).
        2. U.S. citizens working outside the U.S. for non-U.S. firm “controlled” by a U.S. firm: ADEA applies. 29 U.S.C. § 623(h). Same four-factor test used as under Title VII, supra.
        3. The ADEA does not apply outside the U.S. to non-U.S. nationals, non-U.S. firms, or to firms controlled by non-U.S. companies.
      2. ADEA will not apply outside the U.S. if compliance would cause a company to violate the law of the country in which its workplace is located.
    4. Americans With Disabilities Act, 42 U.S.C. §§ 12101 et seq. (ADA): The ADA prohibits discrimination against a “qualified individual” with a disability.
      1. Limited extraterritorial application similar to Title VII above.
        1. U.S. citizens employed outside the U.S. by U.S. firm: ADA applies. 42 U.S.C. §§ 2000e(f), 12111(4).
        2. U.S. citizens employed outside the U.S. by firm “controlled” by U.S. firm: ADA applies. 42 U.S.C. §§ 2000e(f), 12111(4). “Control” test same as under Title VII supra.
        3. Non-U.S. citizens employed outside U.S.: ADA does not apply.
        4. Employees outside U.S. of non-U.S. company: ADA does not apply unless non-U.S. firm is “controlled” by a U.S. firm.
      2. ADA does not apply outside the U.S. if compliance would cause a company to violate the law of the country in which its workplace is located.
    5. Equal Pay Act, 29 U.S.C. § 206(d) (EPA): The EPA prohibits an employer from discriminating between employees on the basis of sex by paying lower wages to employees of one sex for jobs requiring equal skill, effort, and responsibility. It does not have extraterritorial application. See Hart v. Dresdner Kleinwort Wasserstein Securities, LLC, et. al., 2006 WL 2356157 at *6 (S.D.N.Y. Aug. 9, 2006).
  3. Other U.S. Employment Laws
    1. Fair Labor Standards Act, 29 U.S.C. §§ 201-219 (FLSA): The FSLA regulates certain conditions of employment, including standards relating to minimum wage and overtime.
      1. Generally, no extraterritorial application to employment entirely outside the U.S. The provisions of §§ 206 (Minimum wage), 207 (Maximum Hours), 211 (Collection of data) and 212 (Child labor provisions) “shall not apply with respect to any employee whose services during the workweek are performed in a workplace within a foreign country [or outside of certain specified territories].” 29 U.S.C. § 213(f) (1990).
      2. Employee working in U.S. and outside U.S. The Wage and Hour Division of the Department of Labor has interpreted the FLSA as applying to an employee who performs a portion of his or her work during any week in the U.S., even if the remainder of the work for that week is performed outside of the U.S. 29 C.F.R. § 776.7 n.20 (1993).
        1. However, a number of cases have applied a “work station” or “employment base” test and held that employees who are based in a non-U.S. country are not entitled to coverage, even if they perform services in the United States for part of the workweek. See, e.g., Hodgson v. Union De Permisionarios Circulo Rojo, S. De R.L., 331 F. Supp. 1119, 1121 22 (S.D. Tex. 1971) (Mexican bus drivers employed by Mexican company not protected by minimum wage provisions of FLSA, although part of each workweek spent driving in United States).
      3. Exception for U.S. seamen on U.S. vessels: Covered by the minimum wage provisions of the FLSA pursuant to a 1961 amendment.
    2. Labor Management Relations Act, 29 U.S.C. §§ 141 et seq. (LMRA): The LMRA provides certain protections for collective bargaining rights of employees with employers through the labor organization of their choice.
      1. No extraterritorial application. Benz v. Compania Naviera Hidalgo, S.A., 353 U.S. 138, 144 (1957).
      2. The National Labor Relations Board (“NLRB”) has clarified Benz and has held that the National Labor Relations Act, including its LMRA amendments, only applies to employees within the United States and its territories, and not to U.S. citizens working abroad. See, e.g., RCA OMS, Inc., 202 N.L.R.B. 228 (1973) (holding that a U.S. employer in Greenland does not come within the jurisdiction of the Act, even where the employees are hired in the U.S., require U.S. security clearance, are paid from the U.S., and return to their original hiring location in the U.S. upon completion of their jobs).
      3. The NLRB has also held that a U.S. oceanographic vessel is covered by the federal labor law, notwithstanding its indefinite and possibly permanent stay outside of U.S. territorial waters. Alcoa Marine Corp., 240 N.L.R.B. 1265 (1979).
    3. Railway Labor Act, 45 U.S.C. §§ 151 et seq. (RLA): The RLA governs labor relations in the railway and airline industries
      1. Most cases considering the extraterritoriality of the RLA have determined that it has no extraterritorial application.
      2. Employees stationed outside the U.S. are ineligible to vote in representation elections. Offshore Logistics, Aviation Serv. Div., 11 N.M.B. 144 (1984) (applying an “employee base” test).
      3. The RLA does not apply to a dispute involving a U.S. air carrier involved in extraterritorial flying and the union representing its flight attendants (Independent Union of Flight Attendants v. Pan Am World Airways, Inc., 1989 WL 123203 (N.D. Cal. Apr. 7, 1989), app. dismissed, 923 F.2d 678 (9th Cir. 1991), motion to vacate order denied, 810 F. Supp. 263 (N.D. Cal. 1992), but it does apply to the U.S. activities of non-U.S. air carriers. See e.g., Air Line Pilots Ass’n v. TACA Int’l Airlines, 748 F.2d 965 (5th Cir. 1984), cert. denied, 471 U.S. 1100 (1985). See also Guide Chapter 9 discussion of the “Act of State Doctrine.”
    4. Worker Adjustment and Retraining Notification Act, 29 U.S.C. §§ 2101-2109 (WARN): WARN requires employers in certain circumstances to provide advance notification to employees of a plant closing or mass layoff. The statute contains no reference to extraterritorial application and there is no legislative history or case law on the issue.
    5. Family and Medical Leave Act, 29 U.S.C. §§ 2601 et seq. (FMLA): The FMLA requires employers to provide employees with unpaid leave if certain circumstances are satisfied.
      1. The statute contains no reference to extraterritorial application and there is no case law interpreting its scope outside the U.S.
      2. Note: FMLA was patterned in many respects after the FLSA, which implies that it lacks extraterritorial applicability absent specific amendment, such as occurred with respect to the FLSA for U.S. seamen.
    6. Occupational Safety and Health Act, 29 U.S.C. §§ 651 et seq. (OSHA): OSHA requires employers to adhere to certain safety standards in the workplace. The statute’s application is expressly limited to “employment performed in a workplace in a State, the District of Columbia, The Commonwealth of Puerto Rico, the Virgin Islands, American Samoa, Guam, the Trust Territory of the Pacific Islands, Lake Island, Outer Continental Shelf lands . . . Johnston Island, and the Canal Zone.” 29 U.S.C. § 653(a) (1990).
    7. The Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001 et seq. (ERISA): ERISA governs the provision of pension and welfare benefits to employees.
      1. ERISA explicitly excludes from coverage employee benefit plans that are “maintained outside of the United States primarily for the benefit of individuals substantially all of whom are nonresident aliens.” ERISA § 4(b)(4), 29 U.S.C. § 1003(b)(4).
      2. There is little published guidance construing and applying this exclusion. Neither the U.S. Department of Labor (“DOL”) nor the U.S. courts have developed any clear test to determine whether a plan is maintained “primarily for the benefit of nonresident aliens.” ERISA § 4(b)(4), 29 U.S.C. § 1003(b)(4). One important factor in the analysis appears to be the total number of U.S. citizens and/or U.S. residents that are eligible to participate in the plan. However, the case law and DOL Opinion Letters relating to the non-U.S. plan exclusion vary widely on what the relevant proportions are.
      3. Practice Tip: Where a corporation’s benefit plans are maintained outside of the U.S. and a very small percentage of the participants are U.S. citizens or residents, the plans will likely be exempt from ERISA.

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