A secondment generally entails the temporary transfer of a worker to another role or place of employment. The meaning of the term in relation to a contract of employment is a bit ambiguous. The parties to such an arrangement must be clear as to the meaning of secondment under the contract and have regard to applicable employment laws. Generally, a secondment may take one of two forms.

Placement secondment

This type of secondment usually means an employee remains an employee of their existing employer. There is a commercial agreement between the employing entity and a third-party company whereby the employee performs duties for that company. At no time does the employee become employed by the host company.

Transfer secondment

This usually refers to an employment relationship established between an employee and a host company in the secondment location. Sometimes, the existing employment relationship with the original entity is terminated.  

Alternatively, the existing relationship can also be kept in existence but ‘frozen’ or suspended to some extent. This gives rise to a dual employment scenario. Typically, the employee will not perform duties for the host company and the host company will not pay their salary.

The Fair Work Act may apply to an employee whose primary place of work is not Australia, provided they are employed by an “Australian employer”. 

What type of secondment arrangement should you choose?

Sometimes, a ‘placement secondment’ may not be possible in the country an employee is being sent to. This may be due to foreign business regulations that prevent employees of foreign companies from ‘doing business’ in the jurisdiction, or it might be undesirable because it could create a permanent base for the home employer for taxation purposes.

Alternatively, it may not be possible because immigration or personal income tax regulations in the jurisdiction require the employee to have a local employer. If a local employment relationship is required, a company may need to establish a local presence, such as a representative office, branch, or subsidiary, before it can consider sending employees on secondment.

If a transfer secondment is preferred, the effect of the secondment on the home employing relationship must be carefully considered and documented. Sometimes it might be preferable to terminate the home employment relationship to avoid any unintended ongoing risks for the home entity.

Form of secondment

It is important to consider carefully what promises are being made to an employee and by which entity, as those promises may later become the subject of litigation against that entity.

Will there be a tripartite agreement between the employee, the home employing entity and the host entity? If so, what will the governing law of the contract be? Alternatively, will there be one agreement between the employee and the home entity and a separate agreement between the employee and the host entity?

Which company policies apply?

Multinational corporations often have several different policies from one country to the next, and even policies dealing specifically with international mobility. Some of these may have inconsistent or overlapping provisions that need to be resolved.

What happens at the end of the secondment?

Employers also need to consider what happens at the end of the secondment. Does the employee have a guaranteed job to return to in the home country? What happens if that job no longer exists on their return?

If termination is likely, consider how, when and where this will be carried out. Also consider any policy, contractual or statutory requirements in the host and/or home jurisdictions which may apply.

If entering into a release or any form of settlement arrangement with an expatriate, the necessary documentation should be legally compliant and enforceable in both the host and home jurisdictions.

Which jurisdiction?

A common misconception is that expatriates are exempt from local employment regulations in the country to which they are assigned, or that it is possible to ‘contract out’ of local employment regulations by agreement with the expatriate. In general, this is the exception rather than the norm.

Generally, local legislation will apply to all persons performing work in that country, regardless of whether those persons are locals or expatriates. Often, that legislation will state it is not possible to contract out of the obligations imposed by it, particularly where such legislation relates to minimum entitlements such as notice of termination, annual leave, personal/carer’s leave and maternity leave.

Sometimes, the parties might specify a foreign jurisdiction as being the ‘governing law’ and the ‘forum of choice’ for any disputes relating to the secondment. It is important to acknowledge the limits of such a contractual clause. It will rarely, if ever, enable the parties to avoid the applicability of local legislation governing minimum terms and conditions. In addition, in many countries, particularly throughout Asia, choice of law and form clauses may simply be ignored by the local courts.

Australian employment laws & expatriate employees

Australian employment laws will apply to expatriate employees who are working in Australia. It is not possible to ‘contract out’ of the application of local mandatory laws even if the employee’s contract of employment specifies a foreign jurisdiction as being the governing law and forum for disputes.

Regardless of any such clause, local legislation including the Fair Work Act, anti-discrimination legislation, workers compensation legislation and workplace health and safety legislation will be binding on the employer and employee.

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