Policy Guidance: Application of the Age Discrimination in Employment Act of 1967 (ADEA) and the Equal Pay Act (EPA) to American Firms overseas, their overseas subsidiaries, and foreign firms

1. SUBJECT: Policy Guidance: Application of the Age Discrimination in Employment Act of 1967 (ADEA) and the Equal Pay Act of 1963 (EPA) to American firms overseas, their overseas subsidiaries, and foreign firms.
2. PURPOSE: This Policy Guidance is intended to provide information on the handling of cases where the employer is an American firm or its subsidiary operating overseas or a foreign firm operating in the United States or overseas.
3. ORIGINATORS: ADEA and Title VII/EPA Divisions.
4. EFFECTIVE DATE: Upon receipt.
5. EXPIRATION DATE: As an exception to EEOC Order 205.001, Appendix B, Attachment 4 § a(5), this Notice will remain in effect until rescinded or superseded.
6. INSTRUCTIONS: This Notice supplements the instructions in § 605 of Volume II of the Compliance Manual, Jurisdiction. Insert after § 605.

I. Introduction

This policy guidance applies to cases alleging employment discrimination by an American firm's overseas operations; a foreign subsidiary of a foreign firm organized or incorporated under laws of the United States; a foreign firm doing business in this country but not organized or incorporated in the United States; and a foreign firm not organized, incorporated, or doing business in the United States.

In investigating cases under this policy guidance, the Commission's responsibility is to assure equality of employment opportunity and to enforce equal employment rights in those situations where federal fair employment laws apply.

A. Extraterritorial Application of the ADEA

In 1984, the ADEA was amended by Public Law 98-459 to broaden the definition of "employee." Section 11(f) of the Act provides in pertinent part that:

...[T]he term "employee" includes any individual who is a citizen of the United States employed by an employer⁽¹⁾ in a workplace in a foreign country.

Congress amended the ADEA because it wanted to insure that the citizens of the United States who are employed overseas by American firms⁽²⁾ or their subsidiaries enjoy similar protections as citizens and aliens employed in the United States. The House Report states that:

... the amendment is carefully worded to apply only to citizens of the United States who are working for U.S. corporations or their subsidiaries. It does not apply to foreign nationals working for such corporations in a foreign workplace and it does not apply to foreign companies which are not controlled by U.S. firms. H.R. Rep. No. 98-1037, 98th Cong., 2d Sess. 28 (1984).

Section 4(h) of the ADEA provides that:

As amended, the ADEA reaches employers that are controlled by American firms, through a presumption that the subordinate business's discriminatory actions are in fact the actions of the American firm. 129 Cong. Rec. S. 17,018 (daily ed. Nov. 18, 1983) (statement by Senator Grassley).

In determining whether an American employer controls a foreign firm, the Act provides that the following factors be considered:

Congress also noted the need to limit the reach of the ADEA in other countries when it stated in § 4(f)(1) of the Act that:

As a result of the above referenced changes to the ADEA, it is clear that the Act may have extraterritorial application in a number of circumstances. The changes are not retroactive to cases predating their enactment. Wolf v. J.I. Case Co., 617 F. Supp. 858, 39 EPD ¶ 35,845 (E.D. Wis. 1985).

As to alleged age discrimination occurring in the United States, absent a treaty or other foreign policy concern, the ADEA applies to a foreign as well as domestic employer. Since a foreign employer enjoys the benefits and protections of United States law when employing individuals in the United States, it is the Commission's position that such an employer is subject to the Act. See Commission Decision No. 84-2, CCH Employment Practices Guide ¶ 6840.

B. Extraterritorial Application of the EPA

The EPA, as an amendment to the FLSA, is coextensive with the coverage of the FLSA. The FLSA provides that the Act "shall not apply with respect to any employee whose services during the workweek are performed in a workplace within a foreign country." 29 U.S.C. § 213(f).

There are no cases specifically examining the extraterritorial application of the EPA,⁽³⁾ but there is case law interpreting § 213(f) with respect to the minimum wage provisions of the FLSA. In addition, case law addressing the extraterritorial application of the ADEA, prior to 1984, may be used in interpreting the EPA since the ADEA incorporates, by reference, § 213(f) of the FLSA and the EPA was not amended to extend extraterritorially as was the ADEA.

Both FLSA and ADEA cases will, therefore, be examined in this discussion. Although the FLSA, including the EPA, cannot be applied extraterritorially, some cases present a question of fact as to whether a person is employed within the territorial boundaries of the United States. Under some circumstances, the FLSA applies to United States citizens and aliens who perform the duties of their employment both in the United States and in a foreign country within the same workweek. Wirtz v. Healy, 227 F. Supp. 123 (M.D. Ill. 1964). In Healy, the court held that tour escorts who performed services both in the United States and in several foreign countries within the same workweek were entitled to the protection of the minimum wage provisions of the FLSA. The court concluded that "when a tour escort... spends part of a workweek with a tour in the United States, it makes no difference where the remainder of such work is performed; the tour escort is entitled to the benefits of the Act for the entire week." 227 F. Supp. at 129. The court did hold, however, that the tour escort was exempt from the Act's coverage during any workweek in which the employee performed his or her work "exclusively" in a foreign country.

The Healy decision, read alone, would imply that the FLSA, and thus the EPA, would cover any charging party who worked in the United States for any part of his or her employment. Subsequent cases have, however, limited or clarified Healy so that the employee will only be covered by the FLSA if the employee's "work station," or "employment base," is found to be the United States.⁽⁴⁾ Hodgson v. Union de Permisionarios Circulo Rojo, S. de R.L., 331 F. Supp. 1119, 1121-22 (S.D. Tex. 1971); Wolf v. J. I. Case Co., 617 F. Supp. 858, 39 EPD ¶ 35,845 (D.C. Wisc. 1985). The Hodgson court held that Mexican bus drivers (employed by a Mexican bus company which was arguably a subsidiary of an American bus company) were not protected by the minimum wage provisions of the FLSA although they spent part of each workweek driving in the United States. The court determined that the drivers performed only "a minor part of their duties in the United States" and that the extraterritorial application of the FLSA would violate "the sovereignty of another nation by interfering with that nation's regulation of its internal economic affairs...." 331 F. Supp. at 1121. Similarly, in Wolf, a United States citizen was hired by a United States corporation to work in France. Despite the employee's numerous business trips to the United States, requiring a total of 30-34 days per year of performing services for the employer in the United States, the employee's "employment base" was foreign and the employment was exempt from ADEA coverage (prior to the 1984 Amendment extending coverage to U.S. citizens employed by American companies abroad).

Following the "employment base" rationale, the court in Thomas v. Brown and Root, Inc., 745 F.2d 279, 35 EPD ¶ 34,673 (4th Cir. 1984), determined that a United States citizen who worked in the United States for the first three years of his employment, in Scotland thereafter and in Rotterdam for the three years preceding his discharge, was not covered by the ADEA because all of the alleged discrimination, i.e., his discharge, had taken place overseas. The "work station" concept was more fully developed in Pfeiffer v. Wm. Wrigley, Jr. Co., 755 F.2d 554, 33 EPD ¶ 34,282 (7th Cir. 1985), wherein the court held that a United States citizen who was hired in the United States by a subsidiary of a United States corporation for a position in Germany was not covered by the pre-1984 ADEA.⁽⁵⁾ "Pfeiffer was employed overseas -- lived and worked there -- continuously throughout his entire period of employment by Wrigley, and this made his work station foreign and deprived him of the protections of the Act." 755 F.2d at 559. The court did note, however, that if the plaintiff had been transferred from the United States to a foreign country and fired because of his age immediately thereafter, the ADEA "may" have applied since the "work station" would arguably have been the United States, and the transfer, for the purpose of termination, may have constituted the discriminatory act. 755 F.2d at 559.

All other courts which have examined the extraterritorial application of the pre-1984 ADEA have determined that "[i]t is the employee's place of employment which governs the ADEA's applicability," irrespective of the parties' nationality. Helm v. South African Airways, 44 FEP 261, 267 (S.D.N.Y. 1987); Lopez v. Pan Am World Services, 813 F.2d 1118, 43 EPD ¶ 37,005 (11th Cir. 1987), rehearing en banc denied, 819 F.2d 1150; DeYoreo v. Bell Helicopter Textron, Inc., 785 F.2d 1282, 39 EPD ¶ 36,072 (5th Cir. 1986); Belanger v. Keydril Co., 596 F. Supp. 823, 36 EPD ¶ 35,137 (E.D. La. 1984), aff'd, 772 F.2d 902 (5th Cir. 1985); Ralis v. RFE/RL, Inc., 770 F.2d 1121, 37 EPD ¶ 35,490 (D.C. Cir. 1985); Zahourek v. Arthur Young and Co., 750 F.2d 827, 35 EPD ¶ 34,849 (10th Cir. 1984); Cleary v. U.S. Lines, Inc., 728 F.2d 607, 31 EPD ¶ 33,473 (3d Cir. 1984). In summary, Congress limited the reach of the EPA to the United States. Unlike the ADEA, the EPA's coverage has not been extended to include employment occurring outside the territorial confines of the United States.⁽⁶⁾

Note that where the EPA cannot be applied to a United States employer overseas, Title VII might provide an alternative basis for a claim of sex discrimination. See EEOC Policy Guidance Notice 915.033, "Application of Title VII to American Companies Overseas, Their Subsidiaries and to Foreign Companies," issued September 2, 1988.

II. Limits on the Application of the ADEA and EPA

A. Conflict of Laws Considerations

The Commission's ability to process a case against a particular employer may involve conflict of laws considerations which could limit the Commission's exercise of apparent authority over the matter. Specifically, the extraterritorial application of the ADEA and the EPA may conflict with foreign or international laws or offer the respondent a choice as to which law will govern. If such an issue arises, the Guidance Division should be contacted and it will then coordinate with the Department of State.

B. Treaty Agreements Affecting the ADEA and EPA

1. Agreements and Treaties Between the United States and Other Nations - An agreement, e.g., a protocol agreement,⁽⁷⁾ multinational convention, or treaty negotiated between the United States and another sovereign nation, may confer special privileges or immunities on foreign firms or their operations in the United States and reciprocal rights on American firms operating in the other nation.

2. FCN Treaties - A Friendship, Commerce and Navigation (FCN) treaty⁽⁸⁾ is a commercial agreement between two countries. A FCN treaty grants jurisdiction to one country over a foreign employer. Under the terms of a FCN treaty, each signatory grants legal status to the other party's firm enabling each to conduct business in the other's country on a comparable basis with the country's domestic firms. In some cases, a FCN treaty may be the basis of a respondent's challenge to the Commission's authority to process an ADEA or EPA case.⁽⁹⁾

III. Investigating and Processing ADEA and EPA Cases Involving the Foregoing Issues

In investigating cases raising the foregoing issues on the application of the ADEA or the EPA, the following factors should be considered:

A. Status of the Employee

1. ADEA - Both citizens and aliens working in the United States are generally protected by the ADEA. Charges or complaints filed by U.S. citizens employed by American or American-controlled firms outside the United States are also covered by the ADEA. See the discussion of the ADEA, Part I, Section A. U.S. citizens working outside the United States for foreign firms (not controlled by an American firm) are not protected by the ADEA. Similarly, aliens working outside the United States for foreign or U.S. firms are not protected by the ADEA.

2. EPA - Both citizens and aliens working in the United States are generally protected by the EPA. The Commission lacks the authority to process an EPA case filed by an employee alleging wage discrimination if complainant's workplace is located entirely outside the United States. This is the case whether the employer is a United States or foreign firm. If a complainant's "work station" or "employment base" is found to be the United States, however, the Commission has the authority to process the case. Note also that Title VII may be an alternative basis for a sex discrimination claim overseas where the claim cannot be processed under the EPA. See Part I, Section B of the extraterritorial application of the EPA.

B. The Status of the Employer

1. ADEA - American employers are covered by the ADEA. The definition of such an employer includes foreign subsidiaries controlled by U.S. firms and other companies controlled by U.S. firms. See Part I, Section (A) for discussion of the ADEA.

(a) An employer operating outside the United States may be subject to the ADEA in the following situations:

The situation in the example can be characterized as either an integrated enterprise or as a joint employer relationship. These concepts are discussed in detail in Commission Policy Guidance 87-8 dated May 6, 1987. Title VII Commission Decisions discussing these approaches can also be found in Exhibit 603-A of § 603.

One court decision discussing the joint employer/ integrated enterprise concept specifically in the context of a foreign subsidiary of an American parent is Lavrov v. NCR, 591 F. Supp. 102, 35 FEP Cases 988 (S.D. Ohio 1984 In Lavrov, a Title VII case, the court set out the same factors contained in 29 U.S.C. § 623(h)(3) of the ADEA as the considerations to be taken into account when deciding whether the activities of an American parent corporation and its subsidiary are separable: the degree of (1) interrelated operations, (2) common management, (3) centralized control of labor relations, and (4) common ownership. All four criteria need not be present in a particular case. When the activities of the two entities become inseparable from one another, the joint employer/ integrated enterprise theory may be applicable.

(b) The ADEA applies to an employer that is a foreign firm operating inside the United States unless a treaty is involved. See Part III Section C(2).

(c) The ADEA does not apply to an employer that is a foreign firm operating outside the United States unless the foreign firm is controlled by a United States firm. See Part I, Section A.

2. EPA - The EPA does not cover individuals employed overseas, unless the employee's "work station" or "employment base" is found to be the United States. See Part I, Section B, for discussion of the EPA.

C. Treaty or Other Conflict of Laws Concern

1. General - If the respondent raises a provision of a treaty as a defense to a charge where, e.g., an individual (citizen or alien) is working in the United States for a foreign firm, the respondent should be requested to produce a copy of the treaty. Below is an example of how a Friendship, Commerce and Navigation (FCN) treaty might involve an employer. Also see discussion of FCN treaties in Part II, Section B.

2. FCN Treaty and Firm Incorporated in the United States - Under the terms of one type of FCN treaty, each signatory grants legal status to the other party's firms so they can conduct business in the other party's country on a comparable basis with its own domestic firms.

In the example above, the treaty is identical to the one in Sumitomo Shoji America, Inc. v. Avigliano. See supra n. 8. It is the Commission's position that the ADEA would apply to the employer.⁽¹⁰⁾ Under the terms of the treaty, the nationality of a corporation is determined by its place of incorporation rather than the location of its controlling entity. However, for a definitive determination of coverage to be made, it must first be determined that this was indeed the intent of the parties in negotiating the treaty. This can be done by calling the Guidance Division which will in turn contact the State Department for information. (See next paragraph).

When a charge is filed against a firm of a nation other than Japan and a FCN treaty is raised as a defense, the Guidance Division, Office of Legal Counsel, should be contacted for instructions on how to proceed. The Guidance Division will contact the State Department for a legal opinion on the intent of the signatories to the treaty, i.e., the State Department's interpretation of the treaty's provisions on which country's laws will apply. If the State Department finds that the treaty's intent is for United States law to apply based on place of incorporation or for some other reason, then the Commission will rely on that legal opinion and instruct the field office to process the case. If the State Department advises the Commission that coverage does not exist under the treaty, then the Commission will generally defer to this advice. However, if there is reason to believe that the State Department objects to the Commission's processing of the case on other than strictly legal grounds, the Guidance Division will obtain instructions from the Commission on how to proceed with the case. Applying the same rationale as in Sumitomo, Japanese entities that are incorporated or registered in the United States are subject to the ADEA and the EPA to the same extent as American companies; there is no need to contact Guidance.

____3/3/89_____________            Approved: ___________"s"___________
Date                                         Clarence Thomas
                                             Chairman
                                             

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1. Section 11(b) of the ADEA states that,

The term 'employer' means a person engaged in an industry affecting commerce who has twenty or more employees for each working day in each of twenty or more calendar weeks in the current or preceding calendar year: Provided, that prior to June 30, 1968, employers having fewer than fifty employees shall not be considered employers. The term also means (1) any agent of such a person, and (2) a State or political subdivision of a State and any agency or instrumentality of a State or a political subdivision of a State, and any interstate agency, but such term does not include the United States, or a corporation wholly owned by the Government of the United States.

2. The term "firm" is used throughout the policy guidance as a "short hand" reference for all such entities satisfying the § 11 (b) definition of "employer" in the ADEA.

3. Cf. Bryant v. International School Services, 502 F. Supp. 472, 481-482, 24 EPD ¶ 31,440 (D.N.J. 1980), rev'd on other grounds, 675 F.2d 562 (3d Cir. 1982) (court noted, without discussion, that the EPA does not apply outside the jurisdiction of the United States).

4. Although Healy did not specifically discuss the concept of "work station" or "employment base," it did examine the same factors which later courts used to define these terms. For example, the court stressed that the tour escorts began and ended their duties, with respect to all tours, in Chicago, Illinois. 227 F. Supp. at 126. Furthermore, upon completion of each tour, the tour escort prepared a final report which was forwarded to the company's office in Chicago. 227 F. Supp. at 123. Since the tours involved travel throughout the United States, Canada and Europe, it would have been difficult for the court to identify a specific country, other than the United States, which could be considered the "home base" of operations. The court's decision arguably implies that the tour escorts' "work station" was Chicago.

5. Again, the discussion of ADEA cases in this section pertains to the Act before the 1984 amendments and, thus, is believed useful in EPA analysis. Part I, Section A should be consulted with respect to the current extraterritorial application of the ADEA.

6. Absent a treaty or other conflict of laws concern, the EPA applies to foreign employers where the alleged discrimination occurs in the U.S.

7. See Commission Decision No. 86-6, CCH Employment Practices Guide ¶ 6866.

8. In Sumitomo Shoji America, Inc. v. Avigliano, 457 U.S. 176, 29 EPD § 32,782 (1982), a Title VII case, the U.S. Supreme Court was faced with a foreign-owned business incorporated and operated in the U.S. under a FCN treaty. The Court held that, under the terms of the FCN treaty and its history, the employer was a company of the U.S., not Japan, and was subject to the requirements of Title VII. In reaching its decision, the Court in Sumitomo said that a FCN treaty must be construed broadly; where two constructions of the treaty are possible, the least restrictive interpretation is preferable; and the various subparts are to be given a reasonable construction with a view towards providing a fair operation of the treaty. Id. at 185. The treaty is to be given its plain meaning. However, if the language of the treaty is at all ambiguous, great weight must be accorded to the interpretations of the treaty terms by the State Department, the agency charged with negotiating and enforcing the treaty. Id. at 180-8; see also Kolovrat v. Oregon, 366 U.S. 187, 194 (1961).

The Commission adopted the Supreme Court's Sumitomo decision in Commission Decision No. 86-2, CCH Employment Practices Guide ¶ 6860. The Commission said that a foreign-owned company which is incorporated in the U.S. under a FCN treaty between the U.S. and Japan is subject to the requirements of Title VII. It is the Commission's position that the same principle would apply to ADEA and EPA cases.

9. In MacNamara v. Korean Air Lines, 863 F.2d 1135 (3d Cir. 1988), the Third Circuit held that while the applicable FCN Treaty allowed a foreign corporation to favor its own citizens when making personnel decisions, it did not shelter a foreign entity from allegations of discrimination on bases such as race, national origin, and age.

10. When assessing a treaty for Sumitomo applicability, careful inspection of the treaty in question is required to insure that it is indeed identical to the one analyzed in Sumitomo. See also n. 9.