In Palau, the employment framework is primarily divided into two categories of employment agreements, which are determined by the worker's residency status.

Employment Agreements for Palauan Citizens and Residents

Employment agreements for individuals who are citizens or legal residents of Palau are governed by the general employment laws outlined in Title 13 of the Palau National Code (PNC). These laws cover aspects such as minimum wage, overtime pay, termination procedures, and health and safety standards. There is no specific legal mandate that outlines a standardized format for these contracts.

Non-Resident Worker Employment Agreements

When employers need specialized skills that are not available in the local workforce, Palau's legislation allows for the hiring of non-resident workers. There are two types of agreements that govern such employment:

• Non-Resident Worker Employment Agreement: This is a mandatory agreement that establishes the terms of employment between the employer and the non-resident worker. The agreement must be approved by the Director of Labor and should adhere to the provisions outlined in Title 13 of the PNC and relevant regulations.

• Non-resident Worker Employment Agreement Between Employer and National Government: This is a separate agreement required by law. It is signed by the employer and a representative of the Palauan government, authorizing the employer to hire non-resident workers. The agreement typically includes details about the number of non-resident workers allowed, the specific positions they will fill, and the employer's responsibility for repatriation costs upon completion of the contract.

Employment agreements in Palau, while not requiring a standardized format, should include specific clauses to ensure clarity and protection for both employers and employees.

Basic Information

The agreement should clearly identify the employer and employee, including their full names and contact details. It should also outline the specific job title, a detailed description of the employee's duties and responsibilities, and any supervisory relationships.

Compensation and Benefits

The agreement should specify the agreed-upon salary amount, payment frequency (e.g., monthly, bi-weekly), and any overtime pay calculations according to Palau's minimum wage laws. It should also detail any benefits offered, such as health insurance, vacation leave, sick leave, and social security contributions.

Term and Termination

The agreement should indicate whether the employment is for a fixed term (specify duration) or indefinite. It should also outline the grounds for termination by either party, following Palau's termination procedures. This should include notice periods required for termination.

Working Hours and Conditions

The agreement should specify the standard number of working hours per week and overtime thresholds. It should also outline the leave entitlements for vacation, sick leave, and other forms of paid leave.

Confidentiality and Intellectual Property

If applicable, the agreement should include a clause restricting the employee's disclosure of confidential company information. It should also clearly state ownership rights over any intellectual property created by the employee during the course of employment.

Dispute Resolution

The agreement should establish a process for resolving any disagreements arising from the employment agreement. This may involve internal mediation or recourse to the Palau Ministry of Labor.

This is not an exhaustive list, and additional clauses may be necessary depending on the specific employment circumstances. It's crucial to consult with a legal professional to ensure the agreement complies with Palau's labor laws and caters to the unique needs of the employment relationship.

In Palauan employment law, a probationary period is often incorporated into employment agreements. This initial phase allows employers to evaluate an employee's suitability for the role, while also giving employees the opportunity to see if the position meets their expectations.

The Public Service System Rules and Regulations stipulate a six-month probationary period for all new government employees. Although not universally mandated by law, this serves as a benchmark for the private sector. As such, employers frequently include probationary periods in their employment agreements for both resident and non-resident workers.

The maximum duration of a probationary period in Palau is not explicitly stated in national legislation. However, most private sector agreements, following the government's lead, set the probation period at six months. Depending on the specific agreement and the level of the position, probation periods for senior roles may be extended beyond six months to allow for a more comprehensive evaluation.

Probationary Period Procedures

The terms of the probationary period, including its duration and performance evaluation criteria, should be clearly outlined in the employment agreement. Regularly scheduled performance reviews are essential during the probationary period. This allows employers to provide feedback and employees to demonstrate their skills and ability to meet expectations.

Outcomes of the Probationary Period

At the end of the probationary period, there are several possible outcomes:

• Successful Completion: If the employee's performance meets expectations, they typically transition to permanent employment status, which may come with additional benefits and protections.
• Termination: If the employee's performance does not meet expectations, the employer may terminate the employment with proper notice, as outlined in the termination clause of the agreement.

It's important to note that even during the probationary period, employees possess basic rights under Palau's labor laws, including those regarding minimum wage and overtime pay. A well-defined probationary period in employment agreements benefits both employers and employees in Palau by facilitating a period of assessment and ensuring a strong foundation for the ongoing employment relationship.

Employment agreements in Palau may include confidentiality and non-compete clauses to protect an employer's legitimate business interests. However, there are legal considerations and limitations to be aware of.

Confidentiality Clauses

Confidentiality clauses aim to safeguard an employer's confidential information, such as trade secrets, customer lists, or proprietary data. These clauses restrict employees from disclosing such information to unauthorized third parties during and after their employment.

Palau's legal framework doesn't have specific regulations governing confidentiality clauses in private sector employment agreements. However, general principles of contract law apply. To be enforceable, a confidentiality clause must be:

• Clearly Defined: The clause should clearly define what constitutes confidential information.
• Reasonable in Scope: The restrictions placed on disclosure should be reasonable and not overly broad in terms of the information protected and the duration of the restriction.

Non-Compete Clauses

Non-compete clauses limit an employee's ability to work for a competitor or start a competing business for a certain period after leaving the employer.

Enforceability in Palau

The legal enforceability of non-compete clauses in Palau is uncertain. There are no established legal precedents to indicate how courts would view such clauses. However, Palau adheres to principles of fairness in contractual obligations. This suggests that courts might disfavor non-compete clauses deemed excessively restrictive and preventing an employee from earning a living in their field.

Alternatives to Non-Compete Clauses

Given the uncertain enforceability of non-compete clauses, employers in Palau may consider alternative measures to protect their interests:

• Confidentiality Clauses: As discussed earlier, well-defined confidentiality clauses can safeguard sensitive information.
• Non-Solicitation Clauses: These clauses restrict employees from soliciting the employer's clients or employees for a specified period after termination.

Seeking Legal Guidance

Due to the lack of clear legal guidelines, it's advisable for both employers and employees in Palau to consult with a legal professional regarding the enforceability and appropriateness of confidentiality and non-compete clauses in employment agreements.