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International employment contracts

Grace King

05 Aug 2020

Topics

  • Business services
  • Employment Law

Continuing our series of legal consideration in the brave new world of globalised remote working, int his article Grace King and Dominic Cookman look at some of the main things to consider when entering into a contract to work remotely for an overseas company. Or more broadly, what safeguards should an Australian (or Australian organisation) insist upon when engaging in cross-border employment and business?

Contracts

Before signing any contract, both parties should agree on:

  • The law that will govern the contract (a ‘choice of law’ clause); and
  • Which court or tribunal will have jurisdiction to adjudicate any disputes that arise under the contract (a ‘choice of jurisdiction’ clause).

These two elements are closely related but are separate issues.

Choice of law clause

An important element in all contracts, especially international employment contracts, is a choice of law clause. This clause nominates which law the parties intend to govern their agreement, including setting the guidelines for entitlements and protections. This should be specified with as much precision as possible, for example: ‘This contract is governed by the law of New South Wales’, rather than just ‘Australian law applies to this agreement’.

Choice of jurisdiction clause

A similarly crucial but separate clause that should be included in an international employment contract is a choice of jurisdiction clause. A jurisdiction clause sets out which institution (court or tribunal) parties can seek remedy from in the event of a dispute. For example, a contract may stipulate: ‘In the event of a dispute under this agreement, the parties agree to submit to the exclusive jurisdiction of the Supreme Court of New South Wales’.

Aligning clauses

It is possible (though arguably inefficient) for parties to stipulate that a law of a foreign country applies to a contract, but that an Australian court has jurisdiction to settle any disputes. For obvious reasons, best practice is for the choice of law and choice of jurisdiction clauses to be aligned.

Avoiding confusion

Without such clauses, there may be confusion as to which law (and which court) governs the contract, and this can lead to unexpected results. For example, the fact that an employee may complete all of their work remotely does not necessarily mean that their employment is subject to the laws of the jurisdiction in which that work is performed.

This was explored by the UK Employment Tribunal in 2014 in the case of Lodge v Dignity & Choice in Dying. Ms Lodge, who had moved to work in Australia for Dignity’s London branch, brought claims against them in the UK following a dispute. The court found that although Ms Lodge had conducted all her work while physically in Australia, the benefit of that work was derived by her London-based employer, rather than for a local (Australian-based) company. The court classified her as a virtual employee of the London-based business and found she was entitled to bring the employment dispute against them in the UK.

Are the parties speaking the same language?

Contracts outline the expectations of the parties to avoid future misunderstandings and disagreements. For example, In the event of an injury to an employee, it is important that parties are clear as to whether or not the employer’s insurance will cover that injury if it was sustained in the course of international employment duties. If the insurance does not cover an international injury, the employer may need to seek insurance in all jurisdictions that international work is to be performed. Regardless of the circumstances, parties should be clear on the terms of their relationship prior to signing any employment contracts.

Cross-border contracts are often composed of the same contract in two different languages, with each party reviewing the contract in its own language. It may be necessary to independently verify a translation of a contract prior to signing and it is critical that this is done accurately to avoid errors or ambiguity. Therefore, it is strongly recommended to engage a Certified Translator in those circumstances.

Can we help?

Our lawyers have expertise and experience in both employment law and commercial disputes and are available to give legal advice and offer solutions to organisations and individuals in these matters. Contact us on 02 6285 8000 or by email.