The recent enactment of the North American Free Trade Agreement demonstrates that, at least in the near term, trade and investment barriers have become “politically incorrect.” The result will surely be an increase in business activity in foreign countries, including the United States, by companies located elsewhere. This, in turn, increases the potential for conflicts regarding the applicability of the host country’s laws to the operations of foreign businesses.

Of particular interest is a conflict that has arisen in this country regarding the issue of whether foreign firms operating in the United States are subject to the provisions of the Age Discrimination in Employment Act (“ADEA”). Due to a division in the courts on the issue, foreign firms and their counsel may not have a definitive answer to this question unless and until the U.S. Supreme Court decides to settle the conflict.

Statutory Background

Ironically, the origin of the conflict can be traced to Congress’s attempt to give effect to the ADEA outside the United States. As originally enacted in 1967, the ADEA had no extraterritorial reach. Courts interpreting the ADEA held that it did not apply to Americans working for United States companies abroad. In 1984, however, Congress enacted the Older Americans Act Amendments of 1984 (“OAAA”), which, inter alia, extended the ADEA to cover American citizens working for American corporations overseas.

The OAAA accomplished this objective through two amendments to the ADEA. First, it amended § 630(f) of the ADEA to redefine the term “employee” to include United States citizens working abroad. Second, Congress added to the ADEA § 623(h)(1), which provided that, if an employer controls a corporation whose place of incorporation is in a foreign country, any practice by such corporation prohibited under the ADEA shall be presumed to be such a practice by such employer.