Global HR Hot Topic—November 2013: Cross-Border Telecommuting Checklist

by White & Case LLP
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Belgium's Roger Blanpain, perhaps the world's preeminent professor of international employment law, once said that "we live in an information society, driven by knowledge in action....[Services] can be provided via the information highways from anywhere, even from the other side of the globe...We are in a New World. It immediately becomes clear why developments in the globalized, non-material market economies are totally transcending the nation-state and its political authorities." The World of Work in the 21st Century: Challenges and Opportunities (paper presented at Oxford, October 2008) (emphasis added).

Pulling Professor Blanpain's observation down to the multinational human resources level, today's high-tech globalized workplace spawns two vital trends in cross-border HR: International outsourcing and international telecommuting. In a sense, international outsourcing is the big-picture, macroscopic half of this issue—an employer business in one country contracts for products or services from an unaffiliated employer business in another country. International telecommuting, meanwhile, is the microscopic half of this same issue—an employer in one country arranges for one of its own employees to work from a home overseas.

Decades ago, practical issues made cross-border telecommuting almost impossible. In a lower-tech era, a lone wolf employee could not feasibly work solo from a home in a foreign land where the employer had no presence, because he would have needed dedicated office space, secretaries, back-office support and fluid communications with customers and the home office. But now, as Professor Blanpain implies, even a top performer might successfully telecommute "from the other side of the globe" with just a computer, smartphone, printer, express courier delivery and maybe Skype videoconferencing.

Indeed, technologies that facilitate cross-border telecommuting are powerful tools for retaining talented employees who, for whatever reason—business or personal—need to work from a home in a foreign country without checking into a brick-and-mortar office. Allowing overseas employees to work from overseas homes lets the employer leverage technology to retain valued staff and boost employee "engagement," or else plant an employee abroad for strategic reasons. But telecommuting across national borders triggers a number of legal issues.

To tackle the legal problems inherent in cross-border telecommuting, begin by isolating the context in which the international telecommuting arises. Cross-border employee telecommuting questions come up under four different scenarios:

Scenario #1:

Telecommuting from a country where the employer already has staff. Sometimes an employee who used to work at headquarters (or some other established employer facility) now needs to move abroad. The overseas move might be business-driven or it might be for personal reasons—the telecommuter might be a "trailing spouse" married to another company's expatriate or might be returning to a home country to rejoin family or care for a sick parent. Whatever the reason, the employer agrees to let the employee keep his job and telecommute from a foreign home. Where an employer affiliate is already registered, doing business and employing staff in the host country where the telecommuter will work (that is, where the employer already has a local branch, representative office, or subsidiary up, running, employing staff and issuing payroll in the host country), then the employer is ready to payroll the telecommuter legally.

Scenario #2:

Telecommuting from a new country. As Professor Blanpain said, technology facilitates dropping a telecommuting employee into any country—"even [on] the other side of the globe." Multinationals sometimes send telecommuters (or tolerate their going) into foreign countries where the employer is not yet registered and does not yet do business or issue local payroll. Sometimes a multinational even hires a foreign telecommuter to develop a new overseas market without first getting registered to do business locally. Other times an employer reluctantly accommodates an employee who for personal reasons asks to telecommute from a foreign country where the employer does no other business and employs no one else. In these situations, telecommuting means employing what we might call a "floating" employee in a new jurisdiction.

Scenario #3:

Mandatory overseas telecommuting to save rent. Occasionally a frugal multinational closes a smaller or less profitable foreign office to save rent and requires any surviving in-country employees to telecommute from home. The employer may still want to do business in-country, or it might be phasing out its local operations but nevertheless retaining a legacy employee or two for a while.

Scenario #4:

International telecommuting policy. Sometimes a multinational wakes up to the fact that its various local foreign affiliates each host employees working under inconsistent, ad hoc telecommuting arrangements. To bring structure and cross-border consistency to its own telecommuting assignments internationally, the multinational headquarters issues a regional or global HR policy or code of conduct provision that aligns its approach to work-from-home arrangements.

Cross-Border Telecommuting Checklist

Each of these four cross-border telecommuting scenarios raises a number of legal and practical issues. When wrestling with international telecommuting under any of these scenarios, account for these potential issues:

Immigration: Does the telecommuter have the right visa/work permit in the host country? Can the employer even sponsor a visa in the host country? Never let someone telecommute as an illegal alien.

Conforming employment agreement: Does the telecommuter's employment agreement reflect the telecommuting arrangement and comply with host-country law? Outside the United States, employees often have written individual employment agreements; indeed, in jurisdictions from the European Union to Bahrain, China, Mexico, Oman and beyond, laws require written individual employment agreements or statements that must mention (among many other topics) place of work. When agreeing to let someone change place of work to "home," be sure the employee executes an employment contract amendment that reflects that change and that memorializes all other special accommodations particular to the telecommuting arrangement—the topics discussed below.

Pay/benefits delivery: How will the employer legally deliver pay and benefits to the overseas telecommuter? How will the employer comply with host-country payroll, withholding, and social security contribution mandates? What about host-country currency rules? Dual-jurisdiction tax exposure? Equity or stock option plan participation and taxation? Benefits plan eligibility? Social security totalization (treaty) agreements?

"Floating" employee telecommuters: Will the telecommuter work from a home in some country where the employer is not licensed to do business and cannot issue a legal payroll—the "telecommuting from a new country" scenario? This opens a Pandora's box of legal issues, discussed in our Global HR Hot Topic for October 2013, including employment arrangement structure, "permanent establishment," licensing, payroll and employment law compliance. Account for these.

Tracking telecommuter "home": What if some telecommuter at some point quietly moves across borders without telling the employer? Many employers have discovered, too late, that a formerly local domestic telecommuter who started telecommuting in the employer's home country at some point, without saying anything, moved to some other jurisdiction where the employer does not do business, thereby implicating the "permanent establishment," immigration, payroll and other legal compliance problems that we discuss in our Global HR Hot Topic for October 2013. Be sure to impose a tough but enforceable rule prohibiting telecommuters from unauthorized moves. Monitor compliance.

Dislocation: How will the employer address the practical issues around the employee's loss of office—disconnection from peers, lack of contact with the organization, remoteness from clients, lack of secretarial and logistical support, absence from meetings? If the employer is forcing the employee to telecommute (the "mandatory overseas telecommuting to save rent" scenario), how can the employer address the vested or "acquired" rights issues? See our Global HR Hot Topic for January 2009.

Link to physical office: Must the telecommuter dedicate a discrete room to serve solely as the home office? Will there be any "hot desking," mandatory reporting to a physical office, or other anchor to a physical workplace? If so, how will that work? How can the employer summon the telecommuter to meetings or require that some work be done from an employer office?

Expatriate benefits: Will the overseas telecommuter be an expatriate eligible for the company expatriate benefits plan? If so, how will the multinational deliver its suite of expat benefits to someone with no company office? If not, is the telecommuter effectively foreclosed from claiming expat benefits?

Infrastructure/technology: How will the employer provide the infrastructure necessary for the employee to work effectively from home? Consider: Computer; high-speed internet connection; dedicated in-home office; dedicated phone line; Skype. Who pays? How do expense reimbursements for these work? If the telecommuter will supply his own technology devices, has the employer buttoned down BYOD (bring your own device) issues like employee consent, security, monitoring and remote data destruction? Is the employer's BYOD policy even enforceable in the host jurisdiction?

Data security and confidentiality: What systems (technological and contractual) safeguard the employer's business data—online and hard copy—at the home work site? Does the telecommuter expose the employer to an intolerable risk of data breach or breach of confidentiality? Does the telecommuter's physical home office raise risks of non-employees (family members, guests) breaching company information?

Data protection compliance: Does the host country impose an omnibus data privacy law? If so, what systems safeguard the telecommuting employee's compliance? If the employee will process personal data or transmit personal data across national borders, some countries (France, Romania, others) require filings with local data protection authorities, even with a lone telecommuter as "data processor." How will the employer accomplish and pay for these registrations? Separately, how will the employer make any locally required data processing notices/disclosures to the telecommuter himself, as data subject?

Computer and telephone monitoring: Will the employer remotely monitor the telecommuter's computer, keystrokes, log-ons, emails, Internet access or other uses of technology? What about telephone monitoring? Employer monitoring must comply with local data law. Should the telecommuter receive a monitoring notice or sign a monitoring consent?

Registrations and licenses: Does the telecommuter have all mandated host-country licenses? For example, journalists, engineers, securities dealers, doctors and lawyers are regulated professions and often need local licenses. A telecommuter who will need to drive for work needs a locally-recognized driver's license.

Supervision/quality control: How will the employer supervise the telecommuter? How to ensure he works required hours? How to monitor attendance? How to control quality? How to ensure the telecommuter himself personally performs the work (without delegating/subcontracting to others)? Might the telecommuter hire assistants without employer permission? Do procedures here comply with applicable law?

Wage/hour laws: How will the employer ensure it complies with host-country wage/hour laws? How will the employer monitor work hours to comply with local wage/hour, overtime pay, caps-on-hours, break and vacation laws? How will payroll compensate overtime worked? Perhaps all countries impose wage/hour laws, and few jurisdictions exempt as much of the workforce as the Fair Labor Standards Acts does in the United States (a US "exempt" job is less likely to be exempt abroad).

Health/safety and duty of care: Does the telecommuter's home worksite comply with local health and safety laws regulating physical workplaces? How will the employer monitor ongoing compliance? How will the employer meet its duty of care to the telecommuter? All countries impose workplace health and safety laws; these laws rarely exempt home workplaces and are rarely susceptible to contractual opt-outs or employee selections of foreign law. See our Global HR Hot Topic for September 2012.

Compliance with local employment laws, collective agreements and employer polices: How will the employer verify that the telecommuting set-up complies with local employment protection laws? (Again, asking the telecommuter to opt out of local law contractually or selecting a foreign jurisdiction's employee protection laws likely does not work; see our Global HR Hot Topic for September 2012). How will the employer identify and comply with any applicable local industry ("sectoral") collective bargaining agreements? How to comply with the employer's own global policies/codes of conduct?

Real estate: Does the telecommuter's in-home worksite comply with local zoning/subdivision/apartment building restrictions against working or running a business? By definition, anyone who works from home for pay does business in his or her residence. Has the telecommuter contractually committed to comply with these rules—and to indemnify the employer for a violation? Will business visitors meeting at the home office raise real estate problems? Has the employer agreed to reimburse the telecommuter for providing the home office? If not, has the employee adequately waived the right later to claim back rent?

Ending telecommuting: How can the employer end the telecommuting arrangement? Has the employee signed an enforceable agreement to resume office work on employer demand? Vested rights rules abroad can limit an employer's freedom to pull an employee back to an office—especially if this will require an international move.

Return of equipment and data: When the telecommuter quits or is dismissed, how, as a practical matter, will the employer collect back its equipment, data, documents—and all copies?

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