EXPATRIATION: Labor and Immigration Aspects

With global economies widely connected, Brazilian companies have been facing the difficulty in understanding, planning and establishing procedures for the expatriation of associates, whether due to the complexity of labor legislation on the topic, or due to the costs involved in the operation, they often end up adopting practices that do not comply with the Brazilian labor legislation.

Among the major issues connected to expatriation, is the common practice of ending the employment relationship with the Brazilian company and the direct and immediate hiring by the company located abroad. This practice, however, has been rejected by Brazilian Courts, which consider the termination of employment with the company in Brazil void, deeming the practice noncompliant with the legal provisions.

Another relevant aspect that worries companies at the time of expatriation is related to the labor and social security costs involved in international transfers of employees.

It is also worth mentioning the issue pertaining to social security contributions in the home countries and the country where the associate provides services, topic that raises many doubts due to its great complexity.

These three points should be analyzed in advance, so as to allow the company to make the labor planning to carry out the expatriation of its employees. During such planning, the following are set out: i) the manner of expatriation and tools to increase legal security; ii) mechanisms for the reduction of the labor/social security cost; iii) analysis on the social security aspects involved.

Furthermore, labor planning, associated to clearly defined internal expatriation policies, can provide greater legal security and reduction of the costs involved in the international transfer of associates, allowing the company to proceed with its international expansion.

The challenge of carrying out expatriation without the risk of tax losses or any litigation issues would be the vast planning of such expatriations combining a number of professionals with knowledge both of the home country labor and social security legislation and American federal immigration laws and salary calculations and rules of the place the professional is transferred to.

It should be emphasized that the category of the work visa chosen for the expatriation can directly affect the direction, costs and solutions involved in the movement of employees, since a temporary intra-company transfer visa (known as L1) does not require the expatriate to be in the foreign company’s payroll, but other visa categories such as training (J1 or H-3), or skilled worker (H1B/H2) visas require such professionals or trainees to be directly bound to the American entity and, therefore, is a key factor for the employment relationship or training to be in the United States, thus constituting a triggering event.

In light of the foregoing, the labor planning for expatriation, costs and methods for the payment of benefits to the expatriate, will be directly affected by the type of American visa used for the transfer and if such visa is of temporary or permanent nature. Therefore, the search for professionals who can interpret and demystify these points of the legislations of both countries and are able to ensure that the multinational company that is carrying out such movement (often with dozens of expatriates) is not taking labor risks and is not exposed to future legal demands due to lack of knowledge of the regulatory updates in the area of relocation of employees, since such practice is becoming increasingly common around the world.

Written by Daniel Rangel, Labor Attorney at Drummond Advisors, and Louanni Cesario, Immigration Attorney at Drummond Advisors

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