This paper examines the legal and HR considerations involved in recruiting Bill Yates, a U.S. citizen currently employed at a Canadian office of a U.S. software firm, to fill a project manager role on a federal military software contract at MicroSonic Inc. The paper identifies four key legal risk categories — residency, taxes, citizenship, and security and criminal clearance — and discusses how each affects the hiring decision. It also evaluates the use of restrictive covenants in the employment contract, immigration compliance requirements, and the advantages and disadvantages of classifying Yates as an independent contractor versus a temporary employee. The paper concludes that hiring Yates as a temporary employee with a detailed written contract best serves the company's legal and operational interests.
As the HR Manager for the software development company MicroSonic Inc., I was required to retain the services of a headhunter in order to quickly fill the position of project manager for a federal government contract to develop military software within one year. Unfortunately, halfway through the project the position became available because the previous project manager had died of a heart attack.
The headhunter produced information on what appeared to be an ideal candidate named Bill Yates, who is currently employed by a leading U.S. software development company with offices in Canada. Bill Yates is a U.S. citizen but is currently working out of the country at a Vancouver office. There are four legal risks to bear in mind when deciding whether to pursue Yates. These pertain to immigration as related to: residency, taxes, citizenship, and security and criminal clearance.
It is not enough for the recruiter to simply fill the position in this case. MicroSonic Inc. will need to prove that the individual meets the requirements of the federal contract in addition to the needs of the company. MicroSonic Inc. should focus not only on reasons to hire Yates, but also on reasons not to hire him.
In regard to residency, as an American citizen and permanent resident, Yates can be employed in any capacity. However, if he has established permanent residency abroad, he may face future travel or visa concerns.
A second issue is often tax related. Yates, whether knowingly or accidentally, may have relinquished his U.S. citizenship status by avoiding U.S. income, gift, or estate taxes — which would ban him from returning to the United States in an employee capacity. In regard to citizenship, MicroSonic Inc. would be required to confirm that he is eligible to work in the United States. Employers have been required to verify an employee's eligibility since 1986, when the Immigration Reform and Control Act established the I-9 verification process.
Finally, the fourth risk factor is an international security and criminal background check. Although Yates is an American citizen working for an American company, that is not a guarantee that he could pass the international security and criminal background check required of potential employees working on governmental contracts.
If MicroSonic Inc. decided to offer the position to Bill Yates, several restrictive covenants and clauses would need to be added to the agreement. In order to avoid the typical litigation process, the company would require a detailed employment contract. This contract would specifically address the basics of an employment agreement, including termination of employment, termination compensation, non-competition clauses, non-solicitation provisions, and a detailed project confidentiality order.
Because the project is expected to last only an additional six months, specifying the term of the contract would also prevent Yates from assuming he would be an employee for an indefinite period. Clarifying all of these points is crucial, but even more important is ensuring that the contract clearly addresses the original four legal risks discussed above. If information is received in an untimely manner due to international delays, the company must retain the ability to terminate the agreement. The contract would further clarify that Yates would be required to function within all requirements of the governmental contract.
"Complex immigration rules affecting Yates and his family"
"Financial trade-offs and IRS misclassification risks"
Even though an independent contractor arrangement is a viable solution for a highly specialized, short-term project, the immigration concerns and the four risk factors make hiring Yates as a temporary employee the stronger choice. Based on the conclusion that it would be in MicroSonic Inc.'s best interest to hire Yates — assuming he is willing — a detailed employment contract and offer letter would cover all bases for establishing that he is in fact an employee of MicroSonic Inc., compliant with both company requirements and the obligations of the federal contract.
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