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FCN Treaty Does Not Preempt State Employment Claims

    Client Alerts
  • May 04, 2007

Certain foreign companies doing business in the U.S. have protection from some legal claims not available to domestic employers.  Under the provisions of treaties of Friendship, Commerce and Navigation (“FCN”), companies of nations that are treaty signatories are immune from a number of federal laws, including employment discrimination claims based on national origin.  A new decision from the Ninth Circuit Court of Appeals refuses to extend FCN immunity to claims against foreign corporations based on state employment laws.  The suit was brought against Japan Air Lines (“JAL”) by two U.S. employees who claimed that they were retaliated against after complaining about JAL forcing a sick pilot to fly. They sued under California’s whistleblower statute.  JAL sought to dismiss the suit, claiming that the treaty’s provisions preempt state law.


The Ninth Circuit refused to dismiss the case.  While international treaties preempt inconsistent state laws, in the employment context, this preemption only extends to laws that would interfere with the foreign company’s desire to hire its own nationals.  In this case, the whistleblower law protects employees who complain about possible legal violations.  Subjecting foreign companies to this law in no way conflicts with their rights to favor their own nationals.  This case indicates that outside of national origin discrimination claims, FCN preemption may be of limited use to foreign employers doing business in the U.S.