Key Considerations for Companies Navigating Global Remote Work: Part 3 – Compliance with U.S. and Cross-Border Employment Laws

Transcript

INTRO

As remote work remains the new norm for many companies, employers face obstacles in creating compliant multinational workplace policies addressing basic workplace law issues like discrimination, leaves and accommodations, and harassment.  

On this episode of We get work®, we discuss the federal and state laws impacting U.S. companies with global remote work arrangements and how employers can implement policies that adhere to these regulations.  

Today’s hosts are Chris Anderson and Bryn Goodman, principals respectively, in Jackson Lewis’ Greenville and New York City offices.  

Chris and Bryn, the question on everyone’s mind today is: What can employers do to minimize compliance risks for U.S. employers with global work arrangements, and how will that impact my business?   

CONTENT

Chris Anderson 
Principal, Greenville

I'm Chris Anderson, I'm a principal, and I am in the International Employment Group at Jackson Lewis. We are doing a series on global remote work, U.S. employees going outside of the U.S. for a short-term period of time. Bryn and I will talk about some of those parameters around that today.

This is the third installment in this series. We've done immigration, tax, and benefits. Today, we're looking at the employment considerations, both on the U.S. and international sides. When someone who's a U.S. employee goes and works outside of the U.S. for a period of time. I've got Bryn Goodman with me today. Welcome Bryn.

Bryn Goodman
Principal, New York City

Hi, thank you so much for having me.

Anderson

You bet. Can you give a thousand-foot view of your practice really quickly?

Goodman

I'm a principal in the New York City office of Jackson Lewis. I like to act as outside general employment counsel to my clients. I handle a wide range of things. One area that I handle quite frequently is helping employers who have operations abroad and are bringing people to the U.S. navigate the differences between their operations abroad and how employment works in the U.S. Then, also, handling the surprise employees who move abroad and how to navigate that situation. My practice also includes litigation, as well as general advice and counseling.

Anderson

Thanks so much for that overview. In your practice, how does this come up, international remote work of a U.S. employee for a short-term period? Let me qualify it to that when it's their personal decision. This isn't about the employer sending them or assigning them to a country or relocating to a country. This is someone that maybe you do know about it, or maybe you don't, but they go to another country for a short-term period of time. How has that come up in your practice, just in a few practical ways?

Goodman

A lot of times, employers come and want to establish a remote work policy and have procedures in place because they know that their employees often travel or have some flexible work schedule. It can come up where someone has that policy they've put in place, taken the right procedures, and notified the employer. A lot of times, I get a call when we find out that someone has been living somewhere like Portugal for four months, and we didn't know they were there. What implications does that have for us? 

You mentioned earlier that you had two other episodes in this series where you talked about immigration and tax implications, which are some of the biggest issues that you have to deal with. Certainly, go back and listen to those episodes for those of you who haven't already. My specialty is not immigration or tax; I deal with other employment issues, which can be wage and hour, discrimination, and harassment. Leave issues are often a huge thing under the ADA and FMLA. That's when it usually comes up for me, when I get a call with someone panicked.

Anderson

I'm glad you mentioned the other two installments because it was on purpose the way that I thought through the framework of this 360 view of global remote work. There are other areas we can talk about, like restricted covenants, IP, and data privacy. Looking at the three big buckets of immigration, tax and benefits, and then employment, it's not that one is more important than the other. It sounds like you likely would agree that immigration is the first gating mechanism. You have to know their status to work in that country. Then, taxes and benefits often become very material based on the time they're in the country and some other factors as well. But employment is equally as material. 

As we dive into that, what are some ways that you've seen in your practice that, let's focus on U.S. law for a minute, you've seen U.S. law potentially continue to apply or absolutely continue to apply or anything satelliting around U.S. law when someone is working outside the U.S.?

Goodman

When it is a surprise that the person moved abroad, one of the considerations that I mentioned briefly is whether or not there's some implication for an accommodation, either because they traveled abroad for their own serious medical condition or to help a family member with some medical issue. While you obviously want to deal with the implications that you discussed earlier, you also need to be mindful and careful. What is actually underlying here? Do I have some obligations under the Americans with Disabilities Act or the Family Medical Leave Act to either provide or offer leave or to offer remote work as an accommodation? Also, if I do that, what precedent am I setting for my other employees? I want to comply, but I also want to make sure that I'm not setting a bad precedent or putting the company in a situation where we're doing something that's going to get us into hot water with respect to taxes, et cetera.

Anderson

With that, let's go a little deeper with ADA and the Family Medical Leave Act. Is there any affirmative obligation you've seen in any case law or anything bubbling up that would lead an employer to have any requirement to allow someone to remotely work outside of the U.S.? If they had family there, for example.

Goodman

Under disability law, you have to examine whether it's a reasonable accommodation. If you didn't have a remote work policy in place, or you didn't otherwise allow remote work, you'd have a better argument to say, we don't allow this. We're not set up for this, and this is unreasonable for us to allow remote work. A leave of absence is something that would be a little harder to deny if the person, if you could give a leave of absence for that position. The remote work piece really turns on whether this is something that you do all the time. You certainly would need to think twice before denying it if it were based on a disability. You obviously can't deny the trip to go for the doctor's appointment if you provide anyone else with medical leave normally. For the remote work issue, you do need to look at what we have done for others.

Anderson

Right. You and I talked briefly before the podcast about how sometimes there could be precedent-setting issues. You mentioned even unions, and the potential, once you start allowing something, it gets harder to say no. From my standpoint, dealing with this, I know that there are employment risks based on the territoriality principle. When you start working in another country, I want to say to clients, you can say no. However, I hear what you're saying; you have to be consistent about it, and you need to pre-think it, especially if you said yes to certain people. 

Talk about that for a minute. If there's anything about the union context or in the collective bargaining that you've seen that the employer should be aware of.

Goodman

To be clear, many of these laws would not apply extraterritorially in general. However, if you have a U.S. employee to whom the law applies, like if they happen to go abroad and don't tell you, or go abroad and it wasn't at your direction and you didn’t sanction it, but they've been working abroad. Or if they ask to work abroad, which is the other scenario, sometimes U.S. law will apply. When they ask, it could apply if it's tied to a reasonable accommodation or tied to a request to care for a family member. Again, the leave issue is an easier one to deal with, but the remote work one becomes more complicated in the environment we have now because people have been so accustomed to working remotely, especially post-COVID. People think there should be no problem going abroad. Why would I ever be denied the opportunity to go care for my aging parent in another country and also still work and make money? It would depend on the policies.

Oftentimes, there are remote work rights under the CB, the collective bargaining agreement. There's a negotiated provision or clause of that contract that gives the employees certain rights. Again, the NLRA would not apply extra-territorially, but if the CBA allows you to work remotely, does it have any provision that says we only allow you to work remotely in the U.S. or was that not considered? What implications will that have for people in the future?

I did want to mention one other thing. There was a recent Second Circuit case dealing with a pharmaceutical company where an employee applied for FMLA. Again, the rights under FMLA are to take leave and intermittent leave, but not necessarily to work remotely. The court actually said your rights under the FMLA are not to work remotely.

Anderson

I like what you said, you can take leave, but it doesn't mean that you can work. If there's a leave, you can't say you can't go to another country, but you can definitely say you can't work there. 

Goodman

Right. That eliminates your problem, too, Chris, when you're advising about what exposures the company has now under foreign laws. Employers, while you want to say, it's fine, you can work remotely because we're all digital, and it doesn't make a difference. Here you are, sitting in another state on a podcast with me, so why can't people just be flexible? The laws are not set up to allow that. 

If you allow someone to work from another country, from your perspective, if you don't know what the employment laws are in that country, that could create exposure for the U.S. company permitting someone to work there, correct?

Anderson 

Right. Definitely, the longer it goes on, the more material that risk is going to get as a general rule. It really is going to be country-dependent, of course. We know that most countries around the world apply the territoriality principle, which simply means that if you're on their soil doing work, you can't say it's without risk. That person can bring an employment claim at some point if everything goes wrong in the relationship. For example, if there's a global riff, they get swept up into that, and they're still in that location, then they could bring a claim for severance or some other unfair treatment in that country. They could also possibly have a lot bigger benefits than they would get in the U.S. from an employment standpoint. Most countries outside the U.S. typically have greater benefits from an employment standpoint of leave, Christmas bonuses, which is like an extra month's pay a year, more vacation, severance notice, and all those things built in, in most cases. So, absolutely that's true. 

Well, I balanced that with not wanting my clients to have a hair-on-fire moment whenever someone's gone for a few weeks or months, if they're allowing it and they've decided they have a policy. Bryn, you mentioned the need to have a policy, and I can't stress that enough as well, the need for a robust remote work policy or agreement, set expectations that you're still a U.S. at-will employee, so U.S. law applies, and all of those things. We help clients with that all the time. Once that person is there and they're working, if it's allowed for a period of time, analyzing that on a case-by-case basis is important. Often, the employment risk for a short-term period, meaning a few weeks to a few months, is not going to be as material as tax and potentially as immigration, of course. Still, it is something that has to be looked at for sure. 

Bryn, back to the U.S. issue on wage and hour, FLSA. We talked about that when we connected before. I'd love to discuss that for a few minutes. Honestly, it’s an open question for me. If someone is a non-exempt employee in the U.S. and they go overseas for vacation with their spouse, or whatever the case may be. This precipitates them asking for personal reasons to go, and they are going to work for two weeks, two or three months, or whatever that period is. Short term, with the full intent to return, would the FLSA apply equally to them during that period as it would if they were sitting in the U.S.?

Goodman

The FLSA again doesn't apply extra-territorially in general. If you're a German employee, it's not going to apply. If you're a U.S. employee who's traveling, yes, it would apply, and it does create an issue for non-exempt employees. There's already enough difficulty trying to track hours, even when you're in the same time zone or you have set work hours. Now, try to establish that with scheduling meetings over different time zones, whether you have your email remotely? Are you working all the time? It's very difficult to be able to track your hours and whether or not you should be paid overtime. That's something that is difficult in general, especially for smaller employers or for employers that have a lot of employees who are paid on a salary basis, but maybe their duties are not really properly exempt. 

There's really a misconception that just because you get paid a salary, you can work any time and you're not entitled to overtime. That's not the case. As you and I know, you have to actually meet a certain salary threshold as well as a duties test. A lot of people aren't exempt from overtime. If they're traveling, you need to also be able to set proper work hours, track time, pay overtime as you normally would in whatever jurisdiction they would be working in, whatever type of employee they are and where they're located in the U.S. You want to be mindful of those laws, not the laws of where they happen to be temporarily. 

Anderson

To sum that up, the FLSA for someone who's just going for personal reasons, we take the position that would still apply for that period of time because they're still doing the U.S. work and then coming back at that point. 

One other thing I wanted to bring up is mething that comes up in my practice a lot. There is a phenomenon where the law is catching up with the reality of digital remote work. That big phenomenon that I'm seeing in more and more countries over the last few years is called a digital nomad visa or a remote work visa. Basically, the law is catching up with the reality that countries are saying we need a category for this and to be able to put a name on what these individuals are doing who are coming from the U.S. or other countries to their country, and working. However, they're not working on the local economy or doing anything in that local market with a local employer. They're just doing foreign work. In our case, we're talking about basically doing services for their U.S. employer on U.S. payroll. Many, many countries have them. I looked a few weeks ago, and one article reference said 70-plus countries have them now. It's probably bigger than that. We're seeing them all the time, all over the world. 

The big question I have, and I'd love to hear your thoughts on it, is whether you think someone with a digital nomad visa is going to go, and often they allow for a one-year period and possibly even a renewal period after that. We're talking, if you have this visa, you can potentially stay in a country for two years working for your U.S. employer. How does that affect, if at all, our conversation about U.S. law applying? Do you think there'll be a market effect? I think we haven't seen test cases on this yet. Likely we will. What would be your opinion on that if someone's there for a year, then another year, and they have authorization to be there working for the U.S. employer in terms of U.S. law applying?

Goodman

If they're not residing in the U.S., not maintaining a U.S. residence or work presence, or they're not visiting the U.S. Sometimes there are cases where you have someone coming back frequently, once a month or every other week, in which case the U.S. laws would continue to apply. 

If your residence is abroad for some semi-permanent time period, there's an argument to be made. Again, you're right; I haven't seen cases on this yet.  There's an argument to be made that the U.S. law would not apply. It might be difficult for you to benefit from the U.S. federal and state discrimination laws, wage and hour laws, et cetera, because you're no longer really working under those conditions. There will be developing case law in that area. To the extent that the company is located in a certain place in the U.S., certainly, we will see employees trying to take the position that they're protected by U.S. state and federal laws.

Anderson

On the foreign side, this is an open question. I want everybody listening who deals with these issues; if you're in HR and you're dealing with it, just always ask the question. Whether you ask us or some other advisor, just ask the question because it is a material thing. What I'm finding is that it is open in many countries. What I mean by that is it's an immigration driven thing; it's a digital nomad visa, so it gives you authorization to be there. We often connect immigration, tax benefits, and employment, all in a lump. If I can be there authorized without a work permit, then clearly, local employment law doesn't apply, and I don't have to pay taxes. That's not always clearly defined or sometimes not defined at all in these digital nomad visa statutes or other regulations that promulgate them. It's something to definitely look at. 

On top of that, practically speaking, I've talked to colleagues within the global alliance, L&E Global, of which Jackson Lewis is a member. I’ve talked to all our fantastic colleagues around the world through that, and then to other colleagues outside of that. I've had many of them say, our position is that employment law does apply, even if someone is remotely working for a period of time under a digital nomad visa. They can bring a claim for entitlements, which in my mind seems to be going against the attestation that the person will be giving and getting that visa. They're saying, I'm not a local employee, I'm a foreign employee. Part of the requirement is often to attest and give your U.S. or foreign contract or offer letter, and show your pay stubs to show that you're not a local employee. Again, we haven't seen test cases. In the absence of those, there is a vacuum, and people are going to take different sides of it. Again, it is wise for our listeners to be asking that question, not only on employment, but on taxes as well. Definitely listen to that podcast episode, too. We know that for immigration, it's a good tool to have. 

The last thing I'll say on that, it's important for listeners to know that even if someone gets a digital nomad visa in one of these countries, and they don't always give a year, but usually the major ones I've seen give about a year and then even a renewal period. You don't have to give that amount of time. You can say, get the digital nomad visa, but we'll still allow you to go under what's in our policy. That might be two or three months, whatever it is. They can still have that coverage that at least gives them some protection from an immigration standpoint, for sure. Maybe from these other ones as well. 

Goodman

That’s an important point about our colleagues that you spoke to in the Global Alliance, saying, we're going to take the position that the employment laws here and the international laws wherever that person is located apply. Obviously, even if we are sitting in the U.S., we received a claim from someone who had been working abroad for whatever reason, failure to accommodate or pay proper overtime, something under U.S. law. If you take the position that they're not in the U.S., so the U.S. law does not apply to them, logically speaking, someone's going to find that some protections apply. Whether it's the U.S. protections or the protections of a foreign country, it's better that you're prepared and aware of what your obligations could be. Get in front of it, and you set the policies that limit the timeframe, like you said, or you're aware of what would work under the various jurisdictions about limiting the time frame and protecting yourself. Make sure that you're providing consistent responses to requests for accommodation to remote work abroad. If you do those things, then you'll be in a position where you, as an employer, have made it clear what the expectations are. While the law is developing, at least your company policy can be consistent, and you have that argument for yourself.

Anderson

That's a really great point. One final thought on that is what you said a minute ago, which was also so great. We have a situation where if we don't know or if we can take the position that U.S. law may not apply anymore, hypothetically, to these digital nomad visas. You're there for a year and maybe renewing for another year, whatever the case may be, then that's maybe the argument we'll start seeing. Who knows? I got to be covered somewhere. If I'm not covered in the U.S., why can't I avail myself of this coverage? I haven't seen that test case, and I've probably done remote work analysis in a hundred plus countries at this point. It's a developing area of the law, which makes it fascinating to watch. 

Goodman

Knowledge is power. Making sure that you have some system in place to have the employees communicate to you where they are, to update their address, and to make the request more formal for you to consider it is a better situation to be in than operating without knowing what's going

Anderson

That’s what I want to end with: risk mitigation strategies. That was a great segue into it because that's the best one; be consistent and have your policy in place. To be consistent with it, get advice on it so that you're thinking about all the attendant issues as you put it together. A remote work agreement, when someone's gone, sets expectations of U.S. law applying, clarifies that they're still a U.S. employee, and all of that. 

Let's end with this. Have you dealt with the risk mitigation strategy, or dealt with clients who say they want to go, and we don't have employees abroad, so we'll just make them a contractor? Have you dealt with that?

Goodman

Absolutely, I deal with that all the time. It's really a misclassification issue, and you're going to have a problem on a number of levels for a variety of different reasons. If someone's doing a job in the U.S. and they're an employee, under most bodies of law in the U.S., whether it's you are an employee for the purposes of the Fair Labor Standards Act, like you mentioned before, or you are an employee for purposes of unemployment insurance, whatever it might be. If your job duties and your relationship to the company are serving the company in the same way when you were classified as an employee as it is when you move abroad and you're classified as a contractor, you're probably misclassified. 

There are a host of different issues, and it really requires a balancing of your business interests and the risk. It depends heavily on the country that you're talking about. That’s something that Chris, you advise on regularly and something that I don't know that employers appreciate. You mentioned earlier, in the U.S., we are used to at-will employment, but most foreign countries don't have at-will employment. They don't allow employers to terminate people with or without cause or with or without notice. They also don’t allow employees to have the same right, where you can sever the relationship with no further obligation. There is often leave to pay out. You accrued a certain type of annual leave or paid time off. There are severance or other obligations, other entitlements, or sometimes you can't even terminate someone unless you have a basis for cause. Just because you classify the person as a contractor and allow them to move abroad, if they're truly unemployed, you might get yourself into hot water over there. You really do need to take a closer look at these issues before just thinking that classifying as a contractor is going to solve all your problems.

Anderson

Absolutely. I would just add to that, I counsel on a weekly basis clients will say, what do we do if we need this person, but they have a sick parent and they can't come home. My clients have six-month or three-month leaves that range based on risk appetite and a lot of different things.  Wherever they land on their policy of allowing this, if they do allow it, there are cases that come up. A lot happened during COVID, but even now, there are cases where the person needs to stay longer than that. It goes past six months and into a year. What does that look like for the person? Along with changing the contractor status, which I've had a lot of clients want to do. Again, if you weigh the risk and, to your point, Bryn, are willing to change the job duties or if that's possible to recast it, there are ways you can do that. It's not going to be without risk, but it is something that a lot of clients do think about. 

I want to end with the other two that I see all the time. That is using an employer record to employ the person on your behalf in that country. That's usually clients who say this person is indispensable. We have to have them, so what's the middle ground? We don't want to set up an operation, which will be the other mitigation strategy, which many clients don't want to do for one person or even a few, if they don't have business there. They may get an employer record, an EOR, to employ that person. 

Finally, some countries allow, mostly in Europe, and a smattering of other countries, you to register as a non-resident employer where you're raising your hands to employ a person, but you're not raising your hands for permanent establishment or corporate income tax presence purposes. That's a whole other analysis there, but something to think about when you get in that tight spot or when it's a close case in terms of all the things we talked about, especially if you have a foreign attorney, we're telling you with our colleagues through L&E Global, and other colleagues saying local law does or could apply. You need to be willing to pivot and think through it if you want to make it more long-term. 

We'll end with that. Bryn, thank you so much for being part of this today. I really appreciate it.

OUTRO

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