What are the main contracting issues in a cross-border executive employment agreement?

Lisa Talbot (00:00:00)

Hello. Welcome to our video series on cross-border employment and compensation issues. Today we're tackling a question that we get asked frequently: What are the main contracting issues in a cross-border executive employment agreement? For the purposes of this discussion, we'll be focusing on arrangements involving employees located and working in Canada and the United States.

Erica Goldman (00:00:19)

Let's start with Canadian immigration, because this is often the first hurdle when a Canadian company is looking to bring in an executive from abroad.

Lisa Talbot (00:00:26)

Picture this scenario. Your board is conducting a global search for a new CEO. You find the perfect candidate, but they are based in the US. At that point, immigration becomes really the critical path item. You need to build time into your hiring timeline to secure proper work authorization. You can't simply put someone into the seat until that's resolved.

So from a contracting perspective, we recommend including a provision that addresses what happens if immigration authorization is delayed, denied, or even revoked.

Parker Baglole (00:00:56)

And sometimes the immigration piece takes longer than anticipated. We've seen contracts where the executive begins providing services from their home country while authorization is being sorted out, perhaps through a local subsidiary. Of course, this creates tax considerations and other potential legal and logistical issues that need to be carefully managed.

Lisa Talbot (00:01:13)

Exactly, Parker. Immigration, employment, and tax advice all need to be coordinated right from the outset.

Erica Goldman (00:01:19)

And the same principles apply on the US side. Work authorization is equally critical. Accordingly, we recommend US employers factor in processing times, include contingency provisions, and coordinate with immigration and tax counsel early, meaning ideally before you've extended any offer.

Parker Baglole (00:01:35)

Shifting gears, I want to touch on unique perks in cross-border agreements. Many relate to logistics. For example, is the executive’s family relocating? We often see requests for housing assistance, school enrollment support, and other relocation benefits that go beyond a typical domestic hire. One common request is personal tax assistance. Cross-border arrangements create complex tax situations, and at times, employers may wish to consider providing access to qualified tax advisors to help ensure compliance with applicable requirements and avoid surprises for both parties.

Erica Goldman (00:02:06)

Let's turn to governing law and jurisdiction, which is always an interesting discussion in cross-border agreements. The threshold question is: What law should govern the contract? And another important question is: Where should any disputes be resolved? From a US perspective, I typically advise clients to think carefully about which state’s law applies. Employment law can vary significantly across jurisdictions, and selecting the wrong governing law can have unintended consequences.

Lisa Talbot (00:02:32)

The same holds on the Canadian side. Similar considerations apply. I would also note that I generally recommend selecting an exclusive venue for litigation that provides certainty, and avoids disputes about where proceedings should take place should things go awry. That said, you may also consider whether arbitration might be preferable to litigation in certain circumstances and make sure to build that into your contract.

Erica Goldman (00:02:55)

And Lisa, you and I both should remind clients that there are certain rights you simply can't contract out of. In Canada, that includes employment standards entitlements. In the United States, various federal and state laws will impose similar constraints.

Lisa Talbot (00:03:09)

Exactly. Choice of law provisions won't override mandatory statutory protections.

Erica Goldman (00:03:14)

So to wrap up, when you are negotiating a cross-border executive employment agreement, remember to build immigration timelines into your planning, include contingency provisions, think carefully about perks and relocation support, coordinate tax and immigration advice, and give serious thought to governing law and dispute resolution.

Lisa Talbot (00:03:32)

And of course, if you have any questions or if we can assist with your cross-border employment matters, please don't hesitate to reach out to any one of us on the Torys Pensions and Employment team. Thank you so much for watching.

Parker Baglole (00:03:42)

Thanks everyone.

Erica Goldman (00:03:43)

See you next time.