COVID-19 has accelerated changes to how we work.
Individuals have improvised solutions – sometimes without telling their employers that they are sheltering overseas, like Robinson Crusoe – and businesses have accepted or driven change in various ways. As EMEA countries prepare for the second wave, and the EU prepares for Brexit, we suggest pausing and carrying out a check of whether temporary remote work solutions are sustainable.
Here, we highlight actions employers may need to take to be on the right side of the line and protect their businesses.
Free movement? Immigration actions
Where are people currently, and what is the impact of their decisions on the future cost to the employer? The UK's transition period for exiting the EU ends in December 2020, and new sponsor licence arrangements will be implemented for those who employ people in the UK – including sponsor visas for EU nationals for the first time. We focus on the impact in the UK, but there are also effects for those currently working abroad.
For "outbound Crusoes" stuck overseas, each country will have its own approach. But as a general rule, an employee doing their normal job in another country for several months is likely to be "working" in that temporary host country, requiring the worker to have appropriate immigration status beyond a visitor.
Some countries may have amnesties or relax their approach, but local rules should be checked to avoid jeopardising future free movement and incurring the tax and social security issues below. The test is usually based on the individual's activities: if they deliver services, sell products or manage local employees, they are likely to be regulated and not treated as a visitor. To address that, some countries – including several Caribbean islands and Estonia – have introduced a new "digital nomad" visa scheme to attract or retain temporary remote workers.
These employees can return to their home any time but Brits in the EU or EU citizens in the UK may need post-Brexit immigration status – or at least an application or registration under the local rules of the host country – to return to work in that country beyond 31 December 2020. They should check whether local rules permit them to apply now for registered or settled status in their host country, and for the effect of any absence.
EEA and Swiss citizens who normally work in the UK can work remotely back in their home country of citizenship without needing a visa. But these "internal exiles" should also think about the impact of their absence from the UK on their UK immigration status. Any EEA/Swiss citizens ordinarily living in the UK by 31 December 2020 must apply to the EU Settlement Scheme (EUSS) by 30 June 2021 to preserve their right to return to, live and work in the UK after the end of the Brexit transition period. Around 4 million people have done that already.
Applicants are granted "settled status" – UK permanent residency – if they've lived in the UK for five years; those with less than five years' continuous UK stay receive "pre-settled status", which is a temporary five-year permission. They should do this now to enable their speedy return because the UK's Brexit immigration rules will likely create a backlog of cases.
Any EEA citizen with settled status has the flexibility to leave the UK for up to five years without impacting their status. And European workers with pre-settled status can return to the UK to work during 2020 or 2021 without any problem. But they should consider the impact of their absence from the UK on the continuous residence test if they want settled status in the future. They should check if COVID-absence will jeopardise their future settlement rights.
Tax and social security costs
As with immigration rules, there may be local requirements to register for social security. Countries where employees are temporarily homed will have their own trigger points for whether individuals should register for employee contributions. And where they do, employer contributions will follow – for UK workers, the applicable rate could be double or more the rate of social security payable in the UK. Some banks have recently told workers to return to the UK to avoid this.
Broadly, there is a common EU arrangement whereby working 25% or more of their time in another state can trigger local social security contributions. Arrangements are in place to avoid double contributions but unless a deal is made between the UK and EU, employers may need to look at whatever bilateral agreements are put in place to avoid this.
Along with increased contributions for individuals, there could be a risk of establishing "permanent establishment" corporate tax status in a country of refuge. Some of the actions which might be inconsistent with visitor immigration status (see above) could influence this. Some countries introduced "hold harmless" rules for people who are temporarily stranded. But generally, these are focussed on exceptional and temporary changes. After six months or more, now is the time to strategise (re)location on a mid to long term basis.
Pay, benefits and posted worker rules
Temporary solutions are generally being run as if the employee is still at home – pay is going to the normal account and people are being treated as if they have rights under their normal home country contract.
But watch out for local rules aimed at protecting pay rates and avoiding undercutting, and the revised EU Posted Workers Directive, which applies across all member states (even the UK) and which was changed in July. These changes are underreported, but mean that across the EU, when a worker has been assigned locally for 12 months, that triggers an obligation to pay them equally by comparison with local jobs.
For planned expatriates, this will often not be a problem, though there is still an issue with a need to "top up" for parity of benefits of each kind, as it may not be possible to look at the overall aggregate value of an expatriate package. And for Robinson COVIDs, they could inadvertently trigger local country rules.
Employers should examine local rules to avoid an inadvertent tipping point forcing them to add local pay elements. An example in the UK is mandatory requirements for pension auto-enrolment. Unlike some other countries, the UK has "day one" triggers to rights to local benefits where an employee is considered ordinarily to be based there.
To enforce the Directive, member states have registration obligations for posted workers. Employers should review these and correlate with social security and immigration registration, where appropriate.
Duties of care and compliance: the employment relationship
Health and safety
Whether the refuge country's local rules on health and safety apply or not, country of origin rules will usually require employers to conduct a health and safety assessment for remote workers in line with their duties of care.
This can be done remotely, and there are some digital products online which share the process and risk with the employees themselves. But employers should consider an audit of nomads specifically, as risks attached to them may differ from those who are in their normal work country.
Data
As part of an audit, employers should check for compliance by the worker with their obligations as data controllers or processors under GDPR.
Where nomads are placed outside the EU, particular effort should be taken to review whether there are appropriate standard terms or binding rules which can permit the processing of data by the nomad in that country, as well as the nomad's own adherence.
As with much else, depending on any terms agreed for the UK's exit from the EU, this may need to be reviewed for 2021.
Disputes and termination of employment
A recessionary environment creates disputes. There are more grievances about remote working, concerns over surveillance and oversight, Kurzarbeit or job retention schemes, or other forms of whistleblowing.
Under the EU Whistleblowing Directive, in 2021 all EU member states must have rules whereby employers of 50 or more employees have whistleblowing procedures, and laws protecting whistleblowers. In the UK, where this legislation has existed for some time, we have seen an increase in whistleblowing disputes including attempts by employees to get restraining orders preventing their termination.
Where dismissals occur, for example in restructuring or redundancy, employers should check whether local rules would consider the employee to be within collective bargaining arrangements, or within local termination procedures and compensation rights. The Posted Workers Directive itself does not impose host country termination rights on employers, but as a matter of national law, these could be triggered.
One area of real concern is the impact of terminations on non-competes and other post termination restrictions. What if you try and bring someone home and fire them if they refuse? An English employment contract might entitle the employer to restrain unfair competition, but if the employee is in another country, we need to look at whether their courts would enforce the restriction.
Where restructuring is occurring, local advice should capture these issues.
Regulatory/government support schemes
An area where whistleblowing has increased is in relation to alleged fraud or non-compliance with government job support schemes. UK rules have enabled employees stranded overseas to benefit, and if the UK extends its support schemes there is a need to look at whether these employees still count.
There are many disputes where employees allege misuse of support schemes, potentially giving themselves the protected status of whistleblowers. This can occur all the more in highly-regulated financial services, media and life sciences industries, which may have rules about the governing mind being located in the EU or a particular country.
In the UK, recent enforcement remarks from the Financial Conduct Authority include statements that firms are expected to have updated their policies, training and oversight, particularly regarding "bring your own device" practices. Other regulatory terms should be checked.
In the scramble to cope with COVID-19, national solutions have often been adapted which pay little attention to the normal rules on state aid and protectionism. Employers should keep a careful eye on whether Brexit triggers greater interest in the application of home country rules, especially if there is a no-deal Brexit.
Here to help
To discuss any of the issues in this article in greater detail, please contact a member of our Employment, Pensions and Immigration team. You can read our previous coverage of the employment law and HR implications of Brexit here.
