Different Labor Laws in Foreign Countries
Opening offices, labs, retail outlets or manufacturing plants overseas can provide access to new sales markets, proximity to partners or less expensive labor. Countries and regions offer to encourage you to locate an office there and hire local workers. Employment law overseas often differs significantly from the United States. Understanding local labor law is a key component in choosing where to open a new location for your business.
In general, the employment at will doctrine that is so prevalent in U.S. business doesn't exist overseas. Many countries in South America, Southeast Asia and Europe require that you have a specific reason for firing someone. In the European Union, for example, layoffs must be negotiated with worker representatives and approved by the appropriate government authority. In Malaysia, you must use the last-in, first-out rule if you're restructuring. Some countries legally require you to work with underperforming employees. Firing workers for any reason is almost impossible in several Southeast Asian countries, such as Indonesia and Vietnam.
Laws governing sick leave, parental leave and vacation often are more liberal overseas. For example, the combined amount of paid leave for two parents in Norway and Germany is 47 weeks, according to a 2008 CEPR study. All European countries obligate employers to offer at least 20 days of paid leave; some require 30 or more. While mandatory leave laws vary in Asia, some countries require as many as 16 holidays a year. Some countries also require leave for getting married, death of a relative or other special circumstances.
Labor unions typically are stronger overseas than in the U.S. Laws in some countries require employers to consult with worker councils on any workplace changes, including launching of new products or relocating offices. In Europe, work councils can effectively block transactions by refusing to issue an opinion on them. Likewise, employee disagreement can block changes in many Southeast Asian countries such as Vietnam, Thailand and the Philippines.
Each country also has its own laws regarding employment of foreign nationals. For example, Brazil allows Americans to hold only certain jobs, requiring that others go to Brazilians. In France, Americans working for American companies have the same rights as French workers do.