For US businesses looking to expand into Europe, understanding local employment laws is a key priority, but getting to grips with the paperwork can be complex. Failure to take account of the differences in local laws and HR practices can lead to costly mistakes and adversely impact on your business and your staff. With a focus on the UK and Spain, here are our top tips on how to get the key documents right.
Where to start
The first point to bear in mind is that employees in Europe will have the benefit of mandatory local laws, typically being those of the country in which they are employed. This is the case regardless of the law you state is applicable to the employment contract.
Therefore, even if you were to issue a Spanish employee with an offer letter subject to California law, the employee will still have the benefit of the mandatory Spanish employment rights set out in the applicable Spanish regulations and Collective Bargaining Agreement (broadly an agreement reached between an employer and employee representatives or an employer's association of which the employer is a member and trade unions) which will cover matters such as: minimum salary, working time, prevention of occupational risks, and termination and discrimination.
Given this, it usually makes sense for employers to use an employment contract governed by, for example, the local Spanish regulations or UK laws, as the case may be.
Commission and incentive plans should also be reviewed for local compliance, as US plans are typically drafted based on the concept of 'at will' employment (which doesn’t apply in Europe).
In Europe, employment agreements are generally much longer than a typical 'offer letter' used in the US and often run to 10 or more pages.
There are mandatory provisions which must be included in the employment terms (and these differ in each European jurisdiction). Mandatory terms are also commonly supplemented by additional provisions, which govern the relationship and provide additional protection to the business.
In the UK… Employers must provide employees whose contracts last for one month of more, with a written statement of certain terms of employment, within two months of the start of employment. These terms are usually set out in an employment contract and include:
- the names of the employer and employee;
- the date of commencement of employment and when the employee's continuous employment began (which might be different to the commencement date if the employee has transferred in to the business under the 'TUPE' regulations);
- the scale or rate of remuneration and intervals of payment;
- the employee's hours of work;
- the employee's holiday entitlement, including any entitlement to bank holidays and accrued holiday pay on termination of employment;
- the employee's place of work, incapacity and sick pay, and pension; and
- the job title or a brief description of the work;
- the notice periods for termination;
- information about grievance and disciplinary procedures;
- any collective agreements applicable; and
- where the employee is to work abroad for more than one month, the terms relating to that.
There are additional protections which it is advisable to include in the employment contract such as terms dealing with confidential information, intellectual property, post-termination restrictions and notice period arrangements (e.g. garden leave and payment in lieu of notice).
In Spain… employees in Spain must also be informed in writing of the main terms of their employment with the company within two months from the commencement of employment, including terms covering the following:
- the parties' details;
- the start date of employment and, in case of fixed term contracts, the estimated duration;
- the place of work;
- the main job duties or professional group classification under the applicable Collective Bargaining Agreement;
- the salary;
- the employee's working time and holiday entitlement;
- the notice periods for termination; and
- the applicable Collective Bargaining Agreement.
It is not necessary to confirm these terms in writing if they have already been included in the employee's written employment contract.
Although not all types of employment agreement are legally required to be formalised in writing (for example, full time permanent contracts can be executed orally), it is advisable to enter into written employment contracts regardless of the type of employment. A written agreement clarifies both parties' rights and obligations and is an opportunity to set out the many ancillary employment rights and obligations that are usually agreed with employees, including provisions dealing with the duty of confidentiality, post termination restrictions, data protection and overtime.
Policies and handbooks
Whether or not it is customary to provide an employee with an employee handbook differs across Europe. For example, it is much more common to have a separate (non-contractual) handbook in the UK than it is in Germany. The traditional requirements around policies have altered recently with the implementation of the GDPR in Europe and increased requirements on the protection of personal data (which we discuss in further detail below).
In the UK… there aren't many policies that you are legally required to have in place. However, many employers provide employees with an Employee Handbook, which usually contains non-contractual policies and procedures and is a useful way of conveying the substantial volume of information required as a workforce grows. Typical policies include: disciplinary and grievance procedures; expenses; health and safety; equal opportunities; whistleblowing; and the use of the company's IT systems and social media. Having these policies in place can help set employee expectations, give managers a framework and point or reference for dealing with different situations and can also help you in defending claims – for example, establishing a 'reasonable steps' defence to a claim of discrimination by an employee.
In Spain… there is no legal obligation to provide an employee handbook or have policies in place, but they are becoming increasingly popular in certain industries. Employers must abide by the local employment laws and the applicable Collective Bargaining Agreement, which usually regulate all the topics typically governed by policies in other jurisdictions, such as: disciplinary and grievance procedures; expenses; health and safety; use of the company's information systems; use of company cars; use of employees’ personal devices for corporate purposes; and equal opportunities.
This does not mean that employers can't implement their own corporate policies in Spain; they can, and it might be helpful to unify employment practices across jurisdictions – to the extent this is possible. However, policies should be reviewed to make sure they are consistent with mandatory obligations. In addition, having policies in writing ensures employees are aware of their rights and obligations, and helps employers to establish the rules in place in the event of an issue with the employee.
GDPR: 25 May 2018 and beyond
The introduction of the new General Data Protection Regulation ('GDPR') in Europe, which came into force from 25 May, has increased the documentation burden for those with employees in Europe.
Employers will now need to ensure that they have appropriate documents in place to establish GDPR compliance. An employee (or staff) privacy notice is a key part of this and should communicate a variety of information to employees, in a way that is concise, transparent, easily accessible and in plain language. The information in the privacy notice should include:
- the identity and contact details of the organisation;
- contact details of the Data Protection Officer (where applicable);
- the purposes for which the personal data will be processed;
- the legal basis for the processing (for example, necessary for compliance with a legal obligation, performance of the employment contract, legitimate interests of the employer (subject to a balancing exercise with the rights and freedoms of the employee) or, less commonly, consent);
- The recipients or categories of recipients of the personal data;
- any transfer of the data outside the European Economic Area and the basis for the transfer (for example, in the case of transfers of data between an EU subsidiary and US parent company, data may be transferred on the basis of the EU-US privacy shield certification or certain standard contractual clauses between the two entities);
- the period for which data will be stored, or the criteria used to determine how long data will be retained; and
- the individual's rights in respect of their personal data (such as the right of access, right to rectification, or right to erasure).
Privacy notices need to be working, live documents and updated to reflect changing data practices.
The privacy notice is just the tip of the iceberg for GDPR-related documentation and employers should also consider putting in place policies dealing with data protection including:
- a data protection and information handling policy to deal with how employees handle personal data (e.g. customer data or applicant and employee data); and
- a data subject rights document, which gives guidance to the business on managing and responding to requests relating to personal data from individuals, including: candidates, current or ex-employees and customers.
If you would like to discuss your expansion plans or how to manage your international workforce, please do get in touch with one of the team.