Global Employment Law and Equity Compensation Developments .../media/Files/Insights/... · companies entering new countries Engagement options Documentation Mobile employees and expatriate

GLOBAL EMPLOYMENT LAW AND EQUITY COMPENSATION:DEVELOPMENTS TO WATCH IN 2014

Ute Krudewagen, Partner

Dean Fealk, Partner

ACC Austin CLE LuncheonJune 19, 2014

This presentation is offered for informational purposes only, and the content should not be construed as legal advice on any matter.

AGENDA

Employment and equity compensation considerations and pitfalls for companies entering new countries

Engagement options

Documentation

Mobile employees and expatriate assignments

Considerations and frequently asked questions on equity compensation by companies going international

Global compliance challenges for companies expanding abroad

Thinking ahead: employee disengagement

2Global Employment Law and Equity Compensation June 19, 2014

EMPLOYMENT AND EQUITY COMPENSATION CONSIDERATIONS

AND PITFALLS FOR COMPANIES ENTERING NEW COUNTRIES

GLOBAL EXPANSION STRATEGIES

4

Compliance

Business Plan and

Projections

Employment

Global Equity,Benefits

Tax

CorporateIntellectualProperty

Data Privacy

Import/Export

Global Employment Law and Equity Compensation June 19, 2014

ENGAGEMENT OPTIONS

ENGAGEMENT OPTIONS

Employees IndependentContractors

Agency Workers

PEO Employees

Local corporatepresence required?

What quacks like a duck is a duck

Permissible? Are joint employees and need to comply with all applicable employee laws

Payroll registrations? Withholding obligations(VAT, GST)?

Employee leasing laws?

Employee leasing laws?

Benefits? Registration obligations?

Limitations on time or type?

Limitations on time or type?

Fixed term? Sales agent rules? Equal pay obligations?

Joint liability

• Equity compensation?

Equity compensation?



Global Employment Law and Equity Compensation June 19, 2014 6

BREAKING NEWS: limitations on use of dispatch workers in China

Dispatch workers may be used only for temporary (up to six months), auxiliary (supporting the core business), or substitute positions (to replace an employee on leave, training, etc.)

No more than 10% of a hiring company’s total workforce can be made up of dispatched workers; transitional period of two years for companies currently above 10% limit

Detailed regulations in some cities


DOCUMENTATION

EMPLOYMENT DOCUMENTATION

A global strategy for documenting the relationship is key

Sources

Statute Collective bargaining agreements Case law

Strategy

Global, local or hybrid approach

Documentation

Offer letter Employment agreement Handbooks and policies Proprietary information and inventions assignment

agreement (PIIA) Non-competes and non-solicits Commission and bonus plans Data privacy notice Stock option documentation


HANDBOOKS AND POLICIES

Alternatives Codes of conduct Policies Work rules, internal regulations Handbooks

Approaches Global, local or hybrid

Common Topics Discrimination, harassment, bullying Social media, BYOD Privacy / data protection Anti-corruption Whistleblowing


PROPRIETARY INFORMATION AND INVENTIONS ASSIGNMENT AGREEMENT

Areas of greatest risk

IP assignment / ownership and enforcement Preventing employees from exploiting confidential information when moving to a competitor Post-termination restrictive covenants

Common themes

What is the legitimate business interest? What is necessary to protect the interest?

Enforceability and enforcement varies from country to country


EUROPE: post-termination non-competes

Generally enforceable if there is a legitimate purpose (subject to reasonableness restrictions)Compensation generally required for enforcement of the non-competeGenerally not enforceable

SpainPortugal

France

Germany

Italy

Belgium

Ireland

UK

Austria

Denmark

NetherlandsNorway

Poland

Romania

Sweden

Russia


ASIA PACIFIC / MIDDLE EAST: post-termination non-competes

China

India

Thailand

SingaporeMalaysia

Indonesia

Philippines

Taiwan

Hong Kong

Japan

South Korea

Saudi Arabia

Israel

Turkey

Vietnam

U.A.E.

Australia

Generally enforceable if there is a legitimate purpose (subject to reasonableness restrictions)Compensation generally required for enforcement of the non-competeGenerally not enforceable


UNITED STATES: post-termination non-competes

Enforceable if there is any legitimate purposeLimitation on enforcement or additional requirements, e.g. receipt of confidential information or consideration beyond mere employment, limitations on blue pencilingUnenforceable

WA

OR

CA

NV

AZ

UT

ID

MT

WY

CO

NM

AKHI

TX

OK

KS

NE

SD

ND

MN

IA

MO

AR

LA

MS AL GA

FL

SC

NCTN

KY

IL

WIMI

IN OH

VAWV

PA

NY

MEVT

NHMA

CTRI

NJ

MDDE


LATIN AMERICA: post-termination non-competes

Argentina

Chile

Brazil

Columbia

Peru

Venezuela

Compensation generally required for enforcement of the non-competeGenerally unenforceable

Mexico


INTERNATIONAL STOCK AWARDS

Omnibus plans

International sub-plans

International award agreements

What are the trends?

Translations

Electronic acceptance


MOBILE EMPLOYEES AND EXPATRIATE ASSIGNMENTS

WHO SHOULD BE THE EMPLOYER?

Alternative #1: Direct contract with host country employer (‘localization’)

Home Country, Inc.

Host Country, Inc.

Transferemploymentrelationshipthroughtermination &hire

Alternative #2: Secondment

Keep existing employment with home country employer and second or loan to host country employer

Home Country, Inc.

Host Country, Inc.

Seconded

Service Fee

Alternative #3: Transfer followed by Secondment

Transfer employment relationship through termination & hire and then second or loan to host country employer

Home Country, Inc.

Host Country, Inc.

SecondedService Fee

Global Employment Company (“GEC”)

Home Country, Inc. (dormant)

Host Country, Inc.

Maintain dormant employment relationship with home country employer; enter into active employment relationship with host country employer

Alternative #4: Transfer with dormant home country employment relationship or dual employment


BREAKING NEWS: Current Global Mobility Challenges

Increased focus on compliance (individual income tax, immigration, social charges, benefits, corporate tax, etc.) China: Circular No. 19

India: Delhi High Court Centricaruling

Global employment companies or GECs increasing in popularity

Impact on stock awards

Global equity hotspots: Russia, China, Argentina, Australia


CONSIDERATIONS AND FREQUENTLY ASKED QUESTIONS ON EQUITY COMPENSATION BY COMPANIES

GOING INTERNATIONAL

EQUITY AND COMPENSATION CONSIDERATIONS FOR GOING INTERNATIONAL

Primary compliance considerations: Plan design Flexibility for international grants. Employee income tax and social insurances

Maximize incentive value and avoid unintended tax pitfalls. Employer withholding is paramount.

Securities laws Regulated as a financial instruments means registration and or disclosure requirements Often exemptions apply.

Exchange control / foreign exchange Cross-border fund flow can be restricted or trigger disclosures

Data privacy US remains among the least regulated data privacy countries. Managing a plan from the US triggers requirements in other countries.

Employment laws Structure award to reduce risks and associated costs.

Why does compliance matter? Equity is preferred

vehicle for startup growth

Stay focused on company growth and improve footing for ultimate liquidity event


FAQ ON GLOBAL EQUITY COMPENSATION

Are stock awards understood and popular outside the US?

Are certain types of awards more popular?

Can I grant incentive stock options (ISOs) outside the US?

Can I grant stock awards to independent contractors outside the US?

I have a limited budget; what is the most cost effective way to grant overseas?

Can I grant stock awards outside the US?

What do I need to do to grant stock awards outside the US?


GLOBAL COMPLIANCE CHALLENGES FOR COMPANIES

EXPANDING ABROAD

GLOBAL COMPLIANCE CHALLENGES

Codes & whistleblower

hotlines

Dataprivacy

Attorney-Client Privilege

Anti-briberyProblem

countries for equity awards

Cross-border investigations


THINKING AHEAD: EMPLOYEE DISENGAGEMENT

PROBATIONARY PERIODS

Permissible?Length of

probationary period

Monitoring/tracking

Impact of probationary period on exit

strategy


PERFORMANCE MANAGEMENT

Challenging to dismiss for

performance in many countries

Importance of process

Importance of documentation

Paying out severance may be

alternative in a few jurisdictions permitting

terminations without cause


REDUNDANCIES

Threshold for redundancy can be high

Protected employees Selection

Process Consultation Notice

Severance Releases: do they work?

Mass layoff requirements


$ $

Thank You


Ute Krudewagen is a partner in DLA Piper's Labor and Employment group.

Based in Silicon Valley, Ms. Krudewagen focuses on providing multinational companies with solutions to the challenges presented in managing a global workforce. In addition, she counsels companies on employment issues triggered by cross-border transactions.

Ms. Krudewagen advises international and cross-border clients on a broad range of complex labor and employment matters, including background checks, employment agreements, discrimination and harassment claims, social media issues, global policies and procedures, non-compete and proprietary information agreements, works council and union issues, codes of social responsibility, workplace privacy, employee assignments and global mobility programs, global reductions in force, and severance and retention plans.

She also counsels global companies on employment issues associated with transactions, including cross-border mergers and acquisitions, outsourcing transactions, post-acquisition integrations and tax restructurings. Her experience includes successfully addressing employment issues in transactions with workforces in more than 60 jurisdictions, with deal values ranging from US$2 million to more than US$8 billion, including negotiation and drafting of the deal agreement, employee transfers, consultations with unions and works councils, benefits harmonization, interim operating models and acquisition-related downsizings.

A frequent author, Ms. Krudewagen has been published in Workspan, The Daily Journal, Association of Corporate Counsel Newsstand, The Recorder, California Employment Law Magazine and Worldwide Financier, among others. She has also presented on international labor and employment topics at leading industry events, including the Women in International Trade, SHRM and National Trade Counsel conferences.

Legal 500 has named her a recommended lawyer for workplace and employment counseling. She has been recognized as a Rising Star by Super Lawyers of Northern California (2011, 2012 and 2013). She is listed in the Daily Journal's 2013 list of "Top Women Lawyers," which recognizes the top 100 female lawyers in California. She is recognized by Top Attorneys as one of Northern California's Outstanding Young Lawyers.

Ute KrudewagenPartner

[email protected] T: 650 833 2245

Silicon Valley Office2000 University Avenue

East Palo Alto, California 94303

Ute Krudewagen – Global Labor and Employment


Dean Fealk heads the Global Equity practice at DLA Piper. He advises leading multinational companies on a wide range of legal and strategic issues related to doing business overseas. He frequently serves as managing international legal counsel for multijurisdictional and multi-disciplined projects and matters implicating corporate, securities, regulatory, tax, labor, foreign exchange and data privacy. Mr. Fealk has considerable experience in cross-border equity-based compensation programs and international employment matters in Asia, Europe, Latin America, the Middle East and Africa.

The Los Angeles and San Francisco Daily Journal has selected Mr. Fealk for its lists of California's "Top 20 Attorneys under 40" and "Top 75 Labor & Employment Lawyers." The Silicon Valley/San Jose Business Journal has named him to its list of "40 Under 40" movers and shakers in the Silicon Valley who impact their businesses and communities. He has been designated a Marshall Memorial Fellow by the German Marshall Fund and named a US-Spain Council Young Leader; both these honors recognizing the next generation of American leaders. The New Leaders Council selected Mr. Fealk for its "40 under 40 Leadership Award," celebrating young leaders across the nation for their involvement in entrepreneurship, advocacy, media and politics.

Mr. Fealk regularly counsels on international and cross-border aspects of international data privacy, immigration, intellectual property protection, choice of entity, tax and corporate structure. He also advises on a broad array of international employment matters including codes of conduct, employee handbooks, work rules, personnel policies, independent contractor agreements, offer letters, employment agreements, proprietary information and assignment of invention agreements, secondment agreements, lay-offs and redundancies, discipline and terminations, settlements and release and waivers.

On the transactional side, Mr. Fealk has provided counsel on more than US$30 billion in cross-border deals, among them mergers, acquisitions, divestitures, restructurings and integrations. He has led over a hundred international expansion and structuring projects for companies across a wide spectrum of industries and jurisdictions from emerging enterprises to Fortune 500 multinationals. Representative industries include high tech, financial services, pharmaceuticals, consumer products, life sciences, energy, media, manufacturing and distribution.

.

Dean FealkPartner

[email protected] T: 415 836 2521

San Francisco Office555 Mission Street

Suite 2400San Francisco California 94105-2933

Dean Fealk – Global Labor and Employment


DLA PIPER – GLOBAL COVERAGE


Documents

Global Employment Law and Equity Compensation Developments .../media/Files/Insights/... · companies entering new countries Engagement options Documentation Mobile employees and expatriate