Employment at Will? It Doesn’t Apply to Workers Outside the U.S.

What many people do not know is that the U.S. is the only country where “employment at will” applies.

I have worked with several in-house attorneys that were not even aware of this. The fact is that labor laws in general in the U.S. are very pro-business while labor laws in most other countries in the world are pro-employee.

As a result, from the point of view of U.S. headquartered multinationals, firing employees gets stricter, more complex and more expensive once they step outside the U.S.

Big penalties if improperly handled

Outside the U.S., laws regulate how, when and why an employer can end an employment relationship. Many foreign employment termination laws impose lengthy notice periods, large severance pay and cumbersome pre-firing procedural steps.

There can be heavy monetary penalties if these transactions are handled improperly. Settlements are usually calculated as a multiple of annual earnings. In the EU particularly, termination settlements can amount to two to three years of earnings or more.

In Belgium, for example, an employee that is wrongfully terminated may be entitled to up to eight years’ pay. Let’s take a look at a couple of examples of how global terminations can vary.

Germany

Termination based on business reasons (for example, an employer’s decision to restructure its business in a way that certain jobs or positions are no longer needed), requires that a process called “social selection” be applied. The employer must identify who among the employees should be given notice if more than one person is to be terminated. Courts require use of a process called “social selection.” Employers must consider the following factors for each employee:

  • Seniority;
  • Age;
  • Number of dependents or maintenance obligations; and
  • Disability (if any).

The employee with the highest factor(s) in the social selection process keeps his/her job. It does not matter that the employer may be shutting down an entire global business unit that only has employees with a very rare and specific type of design engineering skill — one of which is employed in Germany. The laws in Germany disregard this.

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The only process that can be used is the one described above, the “social selection” process. If the design engineer in that business unit in Germany ends up being older, married and partially disabled, he/she cannot be terminated. Another younger or single employee must be terminated in his/her place.

Japan

The Labor Contract Law requires dismissal to be based on objective and reasonable grounds and appropriate within general cultural and societal norms. For example, if a worker breaks a work rule, this would be called a “disciplinary dismissal.” This type of dismissal is most dishonorable and prejudicial to the employee. Because of this, the courts examine these cases very closely, and only the most egregious conduct cases are approved.

Because of the court’s harsh scrutiny as well as the recognized cultural impact on the employee, employers try to persuade the employee to voluntarily resign by providing monetary incentives. This is a very common practice in Japan. It allows the employee to “save face” and leave the company with honor. Depending on the employee’s position and length of service, the incentive could easily amount to one to two years pay.

Final thoughts

The actions taken to reach a legal resolution regarding employment terminations are tedious, require much time from both local and corporate management and incur both corporate and local country legal fees. In addition, if the company loses a labor court case, monetary penalties can be substantial.

Advice? Never, ever try to terminate any employee outside the U.S. without the advice and counsel of an international labor lawyer.

Jacque Vilet, president of Vilet International, has more than 20 years’ experience in international human resources with major multinationals such as Intel, National Semiconductor, and Seagate Technology. She has managed both local/ in-country national and expatriate programs and has been an expat twice during her career. She has also been a speaker in the U.S., Asia, and Europe, and is a regular contributor to various HR and talent management publications. Contact her at jvilet@viletinternational.com.

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4 Comments on “Employment at Will? It Doesn’t Apply to Workers Outside the U.S.

    1. Thomas Friedman was an extremely simple-minded person who thought at the level of an 8 year old. He just proves as long as you beat the drum as an apologist and excuser for corporate genocide, you’ll be hailed as a genius.

  1. Hi Jacque,
    paying for advice and counsel of an international labor lawyer can be expensive. Why not use the qualifications of local HR? They know very well not only the labour law (Europe), but also best practices.

    Best regards,

    Ivana

  2. Ivana —- there are 2 things I strongly encourage companies to do and that is to have labor/employment lawyers 1) write or review already written employment contracts  and 2) get involved in terminations.
    HR may know labor law but laws change, court decisions change, etc.   It is always best to be safe by consulting a lawyer for these two issues.

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