Overseas employees and U.S. laws: recent developments
In Truman v. Dewolff, Boberg & Associates, Inc., a Pennsylvania resident temporarily dispatched by his employer to work abroad was entitled to receive overtime pay based on the Pennsylvania Minimum Wage Act of 1968 (“PMWA”), even though the work was performed in a foreign country.
The case also serves as an important reminder that both federal and state labor and employment laws may follow and protect U.S. employees overseas—regardless, in some cases, of the employee’s citizenship.
State overtime claim
Mr. Truman was assigned to perform work in England (for approximately six months) and Canada (for approximately one week). He sued under federal law (the Fair Labor Standards Act of 1938 (“FLSA”)) and state law (the PMWA, and the Pennsylvania Wage Collection Act of 1961) to recover allegedly unpaid overtime.
The employer moved for partial summary judgment on the FLSA claims, asserting that the law expressly exempts work performed outside of the United States from its overtime requirement (29 U.S.C. § 213(f)). Mr. Truman conceded that under the FLSA he was not entitled to overtime pay, but argued that under the PMWA, which is silent in that regard, the exception does not exist. Moreover, the FLSA specifically states that it should not be construed as an obstacle to the application of more favorable federal or state laws that establish higher minimum wage standards than the FLSA itself. Accordingly, Mr. Truman claimed that he could benefit from the protection of the PMWA.
The PMWA guarantees that employees will be paid one and one half times their regular rate for any overtime worked. While a few exemptions are found in the PMWA, none of them concern work performed out of state or internationally. In fact, as Truman argued, in Fredrich v. U.S. Computer Systems, Inc., 1996 WL 32888 (E.D. Pa. Jan.22, 1996), the PMWA was considered applicable to employees who performed work in the United States but outside the state of Pennsylvania. Mr. Truman argued that the statute should also apply to work performed in foreign countries. Notwithstanding the express exclusion in the FLSA of overtime work performed outside the United States, the court held that there was “nothing in the language of the PMWA that implies that work performed in a foreign country by a Pennsylvania resident does not deserve the same protections as work performed within Pennsylvania by the same resident and for the same company.” The motion for partial summary judgment was denied with respect to the PMWA claim.
Federal discrimination laws
The extraterritorial application of the PMWA may seem surprising, but courts have, in other instances, accepted the extraterritorial application of other employment laws.
First, to focus on federal laws, in the discrimination context, Congress has explicitly amended the Americans with Disabilities Act (ADA), Title VII of the Civil Rights Act of 1964 (Title VII), as well as the Age Discrimination in Employment Act (ADEA) to give them extraterritorial effect. These protective provisions apply only to U.S. citizens who work for a U.S. or U.S.-controlled company in a foreign country.
Some state anti-discrimination laws also potentially apply to overseas employees, regardless of whether the employee is a U.S. citizen. For example, the New York State Human Rights Law (NYSHRL) prohibits discrimination if the alleged act was committed either in New York or when a New York state resident was a victim of discrimination.
In Torrico v. Int’l Bus. Mach. Corp., 213 F. Supp. 2d 390, 397 (S.D.N.Y. 2002), the plaintiff, a non U.S. citizen temporarily dispatched abroad, brought a claim under the ADA and the NYSHRL. There, the court held that Mr. Torrico resided in New York because he was domiciled in the state. The plaintiff’s assignment abroad did not change his domicile as long as he had the intention to return to New York. The court also employed a “center of gravity” test to conclude that the plaintiff’s temporary assignment could be considered “employment in the United States” for the purposes of the ADA. Mr. Torrico was thus protected under both the NYSHRL and the ADA.
In Iwankow v. Mobil Corp., 150 A.D. 2d 272, 274 (N.Y. App. Div. 1989), the plaintiff was a Canadian citizen who claimed that he had been discriminated against on the basis of his age. He resided in England at the time of the alleged discriminatory act. There, only two and a half years of Mr. Iwankow’s twenty-eight years of employment with Mobil were actually in New York. Moreover, the work performed in New York took place seven years prior to the date of the alleged discriminatory act. The court held that Mr. Iwankow was unable to state a claim under the NYSHRL, but noted that Mr. Iwankow did not allege that the discriminatory decision “originated at corporate headquarters” in New York.
In Ghandour v. American University of Beirut 1998 U.S. Dist. Dist. LEXIS 19154 (S.D.N.Y. Dec.8, 1998), on the other hand, the court was reluctant to apply the statute extraterritorially when the plaintiff was not a resident of New York. It held that discriminatory conduct committed by a New York corporation abroad did not provide a non U.S. citizen, non-resident of New York, with a private cause of action simply because the corporation was based in New York.
At least one court has permitted a whistleblower to bring claims in the U.S. though the employee was not a U.S. citizen. In O’Mahony v. Accenture, 537 F Supp 2d 506 (S.D.N.Y 2008), notwithstanding the general principle of American law whereby legislation is only meant to apply domestically unless expressly stated otherwise, (see EEOC v. Arabian Am. Oil Co., 499 U.S. 244, 248 (1991)), the court applied the statute extraterritorially. The court required, though, that the retaliatory decision have a nexus with the United States.
In O’Mahony, the plaintiff was an Irish national employed in France by the French subsidiary of a Bermuda company. She allegedly informed executives of the company of their obligation to pay French social security contributions owed on her behalf. She was allegedly told by the firm’s global finance controller in New York that the company’s interests would be favored by not making the contributions and concealing the length of her residency in France. When Ms. O’Mahony refused to comply, she was demoted and her level of compensation significantly reduced.
In granting Ms. O’Mahony protection under SOX, the court applied two non-cumulative tests, the “conduct” test and the “effects” test. In the first, the court determined whether the wrongful conduct occurred in the United States; and in the second, whether the wrongful conduct had a substantial effect in the U.S. or upon U.S. citizens. The court focused on the place where the alleged decisions to evade French taxes and to retaliate against Ms. O’Mahony were made, as opposed to her place of her employment. The court concluded that she was protected under SOX because the decisions were made in New York.
The above cases illustrate that courts are frequently willing to apply U.S. labor and employment laws to U.S. citizens—and, in some cases, non-U.S. citizens—who are working overseas. The laws may be federal or state.
Overall, for employers, the Truman case is a warning. It is no longer sufficient to consult only federal laws in order to know what standards must be respected with regard to employees dispatched abroad. Employers must also consider the state laws of (1) the employee’s residence, and (2) the place where the particular employment decision is made.