International Employment Contracts

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The Article is written by Matiha Khan of School of Legal Studies, Central University of Kashmir

ABSTRACT:

This paper mainly deals with the study of the concept of international employment contracts. Such contracts are essential for employment generation at the international level. Most Multi-National Companies (MNCs) execute employment contracts before recruiting employees from across the globe. Employment contracts at the international level make it easier for the contracting parties to implement and regulate their contractual relationship. It also envisages the rights and duties of the contracting parties. With the advancement of technology and the introduction of the remote work concept, the significance of these contracts has increased. The paper comprehensively deals with the importance of international employment contracts, various international conventions for regulating such contracts, and the practical application of such contracts in India.

Keywords: Multi-National Companies, contractual relationships, technology, remote work, international conventions.

INTRODUCTION:

An employment contract is simply a contract between an employer and an employee by way of which a new employment relationship is created. It is an important contract that determines the relationship between the employer and an employee, the fixture of wages, bonus structure, work schedule and benefits, confidentiality provisions, and mechanisms for termination of employment. In a narrower sense, these contracts are entered between employers and workers in a particular country. However, due to the advancement of technology and science, these contracts, in their wider application, are entered into between the employer of one country and the employer from another country. In other words, when an employer in one country seeks employees from other countries by entering into employment contracts, such contracts are known as international employment contracts. These contracts are functional within the global sphere and govern the relationship between international employers and employees.

LAWS RELATING TO THE INTERNATIONAL EMPLOYMENT CONTRACTS:

When an employee seeks employment in his country, it is easier to frame and regulate the employment contract because of various municipal laws. However, when an employment contract is executed internationally, it becomes difficult to cater to multiple challenges arising from the employment relationship. For example, if Company A has executed an international employment contract with a Worker B, who belongs to a different country, and Worker B faces difficulties during the course of employment due to the fact that the laws in the country of Company A are different from the laws of the worker B’s country in respect of vacation days, sick leave and wages etc. To avoid such situations, parties to the international employment contract are given the right to freedom to choose various international principles, including lex voluntatis[1], lex loci laboris[2], and lex personalis,[3] to govern their legal relationships. Different international conventions have incorporated the above-mentioned principles regarding such contracts.

THE HAGUE CONVENTION ON THE LAW APPLICABLE TO AGENCY AGREEMENTS, 1978:

The Hague Convention mainly deals with the law applicable to agency agreements, i.e., where a person acts as an agent of another while dealing with a third party at an international level. The convention expressly provides that the law under this convention shall apply to the contracting parties irrespective of their municipal law[4] unless there is a contract to the contrary[5]. It also specifies the formation of an agency at a particular international level, along with the functions and duties of the agent, thus governing the employment relationships between the contracting parties.

THE ROME CONVENTION ON THE LAW APPLICABLE TO CONTRACTUAL OBLIGATIONS, 1980:

The Rome Convention applies to all Europe Economic Community (EEC) countries with regard to the law applicable to various contractual obligations at the international level. It has incorporated the concept of lex voluntatis, i.e., the principle of freedom of choice, to the contracting parties. The parties can expressly mention the legal relationship they require to establish about various contractual obligations, including the contracts of international employment. One of the essential features of this convention is that the employees are not devoid of some mandatory standards required to establish a healthy employment environment, even if those standards are not mentioned in the contract itself[6]. It also mentions that in a country where the laws differ in states, the contract shall be governed by the law of that state where the contractual obligations are carried out.

THE INTER-AMERICAN CONVENTION ON THE LAW APPLICABLE TO INTERNATIONAL CONTRACTS, 1994:

The Inter-American Convention on the Law applicable to International Contracts is also known as Mexico Convention. It deals with the laws applicable to contracts at an international level. The core principle under this convention involves the choice of law given to contracting parties. Such choice can either be expressly provided in the contract or implied from the conduct of parties. The parties have the choice to apply their chosen law to the whole or a part of the employment contract. The notion of modern private international law is to give a choice of law to the contracting parties because the contracting parties are in the best position to choose the law applicable to their established legal relationship. It also envisages the ‘proximity principle[7]’, which states that if the contracting parties do not agree on a particular law to be applicable to them, or the law chosen by the parties proves to be ineffective, the court shall take into account the law of the land where the contract is executed, the performance of a contract, nationality of the contracting parties etc. The court may also take into consideration the principles of international commercial law recognised by the international community.

CONTENTS OF INTERNATIONAL EMPLOYMENT CONTRACTS:

The contracting parties are free to choose a particular format for the execution of international employment contracts. However, the International Labour Organisation (ILO) under its Labour Code, 2019 has provided specific essential requirements that the parties must incorporate while framing the employment contract:

The contents of the employment contract must reflect the remunerated work, wages, management, direction and management of one party on the other.
It must be concluded in writing, and each party must receive at least one copy of the contract.
It can be concluded electronically or via a data message (per the law on electronic transactions).
Where the duration of employment is less than one month, the parties may enter into a verbal contract, except for employment contract with a person who is less than fifteen years of age and their legal representative, domestic workers, representative of workers who are eighteen years of age or older must be in written form.
The employment contract may be executed as an Indefinite term employment contract and a Definite term employment Contract[8].
The employer is prohibited from including any clause in the contract whereby he is authorised to keep the workers’ original identification documents, degrees, or certificates. He cannot require the worker to place any deposit to guarantee the implementation of the employment contract.
The contents must specify the following:
The work to be undertaken, along with the nature of the work.
The duration of employment.
The fixture of wages.
Social insurance, health insurance and unemployment insurance.
Other information consistent with the law.
The contract must necessarily consist of a termination clause to specify the process of termination of the contract. A worker may be terminated without reason with prior notice. The period of notice depends on the contract. The employer can unilaterally terminate the contract by providing a reason and a notice.

FUNCTIONAL ANALYSIS OF INTERNATIONAL EMPLOYMENT CONTRACTS IN INDIA:

Different countries around the globe have their own mechanisms when it comes to the formation and implementation of international employment contracts. The international conventions grant countries the freedom to frame their laws to regulate contracts. The India Overseas Employment Contract must include the following:

Period of employment and place of employment.
Wages and other conditions of services.
Free food and accommodation and food allowance provision.
In case of death of the emigrant, repatriation of the remains.
Working hours, overtime allowance, and other working conditions, including leave and social security benefits, as per local labour laws.
To and fro air passage at the employer’s costs.
Mode of settlement of disputes.
Medical benefits.
Conditions for termination of employment.
Provisions regarding coverage of special risks, including war.
Provisions regarding remittances, and
Provisions regarding renewal of the contract.

The Ministry of Labour and Employment, Government of India, has also provided a guide for those seeking employment in a foreign country. It specifies the fees to be provided to the recruiting agency, legal remedies in case of violation of recruitment rules, a mechanism to file a complaint against a foreign employer, and things to be taken into consideration before applying for jobs outside India.

While interacting with some Indians working overseas, we found that those working in Middle-Eastern Countries, including Oman and Saudi Arabia, usually execute contracts with the companies for 6-12 months. The employer provides basic facilities to the workers, including food, accommodation, medical facilities, bonus and increments, and wages, which are expressly mentioned in the employment contract. The workers are facilitated to visit India twice a year at the employer’s cost. One of the Indian workers in Zimbabwe informed us that he entered into an employment contract for two years, where he was provided food and accommodation facilities. However, the contract does not offer the workers any increments or renewal of the employment contracts. Similarly, Indian workers are showing a high interest in the healthcare sector of the United Kingdom (UK), whereby they are required to execute contracts for a period of 5 years. Such workers become eligible for UK citizenship after working for a period of 5 years. They are provided with all the necessary employment conditions by the employer, including food, accommodation, health insurance, to and fro travel costs, renewal of contracts etc. Those working in Canada are employed for two years as specified under the employment contract. The employment contract specifies the working conditions, including to and fro travel costs, fixed salary, vacation days etc.

While as foreign nationals in India can be employed by a company that is a legal entity as per the laws of the land. The foreign workers desirous of working in India must have a visa, either employment vis or business visa. The minimum wage per year should be USD 25,000. The employers must offer a letter of employment to the employees in accordance with the Indian Laws.

CONCLUSION:

When it comes to International Employment Contracts, they have a unique place in governing the relationship of private individuals, i.e., the employer and the employee. The importance of such contracts became public during the Covid-19 lockdowns around the world when the concept of ‘work from home’ got the world’s attention. The application of work from home principle paved the way for employers of one country to hire employees from other countries for an effective workforce in an easier way. Even after the lockdown period, it has become easier for employers to not only seek employment opportunities in their own countries but also, outside their countries, in a relevant workplace in accordance with their specific concerns. At the same time, foreign companies find it easier to employ workers from other countries.

REFERENCES:

Ziad Kh. Al-Enizi & Waleed Fouad Mahameed, Protection of employees in international employment contracts | Journal of Governance and Regulation, p. 76 | (2023), (PDF) Protection of employees in international employment contracts (researchgate.net), last seen on 04/05/2023.
The Hague Convention on the law applicable to Agency Agreements, 1978
The Rome Convention on the law applicable to Contractual Obligation, 1980.
The Inter-American Convention on the Law applicable to International Contracts, 1994.
Department of International Law, Secretariat for Legal Affairs Organisation of American States, The Inter-American Convention on the Law Applicable to International Contracts and the Furtherance of its Principles in the Americas, OEA/SG DDI/doc. 3/16 (15 March 2016) available at technical_secretariat-dil-supporting_documents_contracts.pdf (oas.org), last seen on 05/05/2023.
Labour Code, 2019 (Employment Contracts), International Labour Organisation, available at wcms_768791.pdf (ilo.org), last seen on 03/05/2023.
India Pre-Decision Booklet, International Labour Organisation, available at India.pdf (ilo.org), last seen 03/05/2023.

[1] Lex voluntatis is a principle used in private international law, where parties to a contract are given the autonomy of will to choose the law governing their contractual relationship.

[2] lex loci laboris is a principle whereby a person employed in a particular territory is subject to the law of that territory.

[3] lex personalis deals with an individual’s personal choice while determining his status and capacity in a contract.

[4] Article 4

[5] Article 5

[6] Chapter: Individual Employment Contracts, Article 6

[7] Article 9

[8] Under the definite term employment contracts, the term of employment along with the termination of the contract is specified, which cannot be longer than 36 months.