In the wake of the pandemic and global adoption of teleworking, an increasing number of employees are looking to work remotely abroad. Unfortunately, the law is not as flexible as technology. It may be very easy for employees to work abroad in practice, but there are a number of potential legal pitfalls that can create risks for employers. Below are some issues employers may want to consider when facing a request to work remotely from outside the United States.
Objective Business Needs
First and foremost, how employers address remote work requests could give rise to discrimination claims (particularly on the grounds of national origin). An inconsistent or subjective approach to these requests may invite scrutiny. Therefore, employers may want to implement clear policies and procedures on remote work.
Work Authorization
Working in any country requires work authorization from that country. Generally speaking, if employees do not have work authorization by virtue of citizenship or permanent residence, they will need a work visa. A tourist visa is not adequate and a business visa has very limited application. Since the pandemic began, some countries have introduced digital nomad visas to encourage remote work from their territories, but few have implemented these measures. Working without legal authorization creates risk for both the employee and their employer. This issue is particularly important for employers that are considering going public or being acquired because it may come up during the due diligence process.
Tax Implications
Performing work from another country can raise significant tax issues for both employers and employees. For example, most countries consider an individual to be subject to their tax laws after being present in country for 183 days. Once an employee has tax liability, the question becomes what the employer’s responsibility is for tax withholding in that country. Also, depending on the type of activity in which employees engage, allowing them to work abroad could cause an employer to inadvertently create a permanent establishment there, thereby exposing it to corporate tax liability in that country.
Work-Related Injuries
Generally, workers’ compensation insurers often do not provide coverage for employees who are outside of the United States for sixty to ninety continuous days, depending on the policy. Also, employees that suffer work-related injuries or illnesses while abroad may seek medical treatment utilizing that country’s social system, which in turn can give rise to an investigation by authorities into an employer’s liability for social security contributions and/or the cost of medical treatment. Therefore, a claim of industrial injury could be more costly to an employer when it occurs abroad.
Employment Law
Employees may claim that they are entitled to the benefits and protections of their destination country. Outside of the United States, employment benefits and protections tend to be far more expansive than they are within the United States, which can result in complicated and costly issues for United States employers. Also, some United States-based benefits like 401(k) plans may not extend to employees while they are working outside of the United States.
Intellectual Property
If an employee generates intellectual property (IP) while working abroad, the rightful owner of that IP may be difficult to determine. When IP is created in a foreign country, it is arguably subject to that country’s laws, which may address work product differently than is done in the United States. Other countries may require special consideration for assignment of the IP, or restrict the flow of IP to the company. Employers may want to examine IP clauses in their remote-work agreements and/or consider alternative options.
Key Takeaways
Employers may want to determine how they will approach remote work-abroad requests based on their appetite for risk and consider creating internal policies that address their needs and risk assessments. Employers may also want to consider requiring employees to sign voluntary short-term remote-work agreements that outline expectations, clarify duties and responsibilities, and set forth temporal restrictions and data security requirements before allowing employees to work remotely. A carefully tailored agreement covering the terms and conditions of remote work-abroad assignments can help ensure successful outcomes.
Ogletree Deakins’ Cross-Border Practice Group will continue to monitor and report on developments with respect to issues that impact employers with employees working remotely abroad and will post updates to the firm’s Cross-Border blog as additional information becomes available. Important information for employers is also available via the firm’s webinar and podcast programs.
As an expert in international employment law and remote work arrangements, I've gained extensive experience and insight into the complexities surrounding remote work, particularly when it involves working abroad. My expertise is founded on practical knowledge and a thorough understanding of legal frameworks, compliance, and the multifaceted challenges faced by both employers and employees in cross-border work scenarios.
Regarding the article's concepts:
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Objective Business Needs: Addressing remote work requests requires clear, non-discriminatory policies to avoid legal scrutiny. Employers must establish consistent procedures for managing such requests to mitigate potential claims of discrimination.
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Work Authorization: Working in a foreign country demands appropriate work authorization, typically through a work visa. Failure to obtain legal authorization can lead to risks for both employees and employers, potentially affecting acquisitions or public offerings.
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Tax Implications: Remote work across borders can trigger complex tax issues for employers and employees, particularly concerning tax liabilities and responsibilities for withholding taxes in the country where work is being performed.
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Work-Related Injuries: Employees working abroad may face challenges with workers' compensation coverage and medical treatments, impacting an employer's liability for social security contributions and medical costs in the foreign country.
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Employment Law: Employees might assert entitlement to the benefits and protections of the country where they're working, which can significantly differ from those in the United States, leading to intricate and costly legal issues for U.S.-based employers.
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Intellectual Property: Determining ownership and handling of intellectual property generated by an employee working abroad can be complex, as foreign laws may differ in addressing work product and IP ownership compared to U.S. regulations.
The article's key takeaways stress the importance of formulating clear internal policies, risk assessments, and structured agreements for remote work abroad. Employers should consider implementing short-term remote work agreements outlining expectations, duties, responsibilities, data security requirements, and temporal restrictions.
Continuous monitoring of legal developments and updated guidance from legal advisors, like Ogletree Deakins’ Cross-Border Practice Group, can help employers navigate evolving regulations and mitigate risks associated with remote work arrangements across international borders.
In conclusion, managing remote work arrangements abroad necessitates a nuanced understanding of various legal, compliance, and logistical challenges, requiring tailored strategies to ensure successful outcomes while mitigating potential risks for both employers and employees.
