During the COVID-19 pandemic, many companies have experienced the challenges and benefits of remote work. While we hope the pandemic will soon become a memory, it is likely that our collective experience has permanently changed the way we look at our physical workplaces. As travel restrictions are rolled back, more and more workers may start thinking beyond just “working from home” and begin seeking opportunities to work from entirely different countries.
International workforces are not new—many companies are established in multiple jurisdictions. However, new issues arise when considering the necessary arrangements to support an employee’s desire to work from a country where the employer has no presence at all.
This article touches on some of the most important legal considerations for employers faced with an employee’s dream of working abroad.
Immigration Status and Tax Obligations
When an employee is working remotely from another country, important immigration and tax implications arise. These implications will vary depending on the remote work arrangement. Will the employee be island hopping across the Caribbean or otherwise changing locations every few months? What is their immigration status—are they authorized to work in the jurisdictions they visit or relocate to permanently? Before an employer can even begin to evaluate the viability of such remote work, it will be necessary to establish a very cooperative and transparent dialogue with the employee, so as to confirm their planned location(s) of work.
While the full range of tax considerations for employers is beyond the scope of this article, it will always be important to determine if the remote work arrangement could create a “permanent establishment” (and therefore a taxable presence) in another country. Beyond length of stay, a few other factors can influence this determination, depending on the country. For example, the employee’s visa status, employment status (employee or contractor) and the employee’s specific role all might be relevant factors.
Further, employers should be aware that Canada has bilateral tax treaties with approximately 100 countries. This means that a one size fits all approach will probably not be appropriate. And while some countries have created “nomad visas” which can make the immigration and tax implications of remote work abroad easier to address, not all countries have taken this step.
Employers should also be aware that employment standards vary significantly from country to country. Things like hours of work, leaves of absence, termination notice and the like are regulated very differently in jurisdictions outside of Canada. An employer will need to determine if those various employment standards apply to the remote working arrangement. Even if an employment contract states explicitly that the working relationship is governed by the laws of Canada, that contract might not be enforceable in a foreign jurisdiction.
Employers should also consider local health and safety requirements, and whether disability, injury and medical insurance coverage applies outside of Canada.
In most instances it will be necessary to obtain guidance, and perhaps legal advice, from an expert from the jurisdiction in question. It is rarely, if ever, a good practice to just assume that our local employment standards requirements will meet or exceed those in a foreign jurisdiction.
Data privacy issues can arise when employees are working remotely in foreign jurisdictions. Depending on the nature of an employee’s position and responsibilities, it may be necessary for them to have remote access to private information belonging to customers or other employees. Electronically transferring such data across borders will engage security and privacy laws that should not be ignored.
Transferring sensitive data abroad can also introduce data security risks. Such risks vary by country, as the data transmission infrastructures in some countries operate very differently than ours. To minimize these risks, employers should conduct a data risk assessment to ensure appropriate security safeguards are in place, as well as training to ensure those working abroad understand the risks and their obligations regarding data security.
Many employers are still learning how to manage remote work arrangements locally. While the challenges associated with remote work abroad are not insurmountable, the necessary due diligence is certainly next level. Employees (and employers) should not assume that remote work in a foreign jurisdiction is just the same as working from home but farther away.
To be successful, all remote work arrangements require clear and proactive communication with employees. As we transition out of the pandemic, employers should revisit their remote work policies to ensure expectations about the location of such work are clear. Employers should consider amending their remote work policies to emphasize that employees should not change their work location without the employer’s prior permission. Employers who are surprised to discover that an employee has already moved abroad should seek legal advice in both Canada and in the country the employee has snuck off to.