Working remotely abroad: what are the new challenges for employers and employees?

Due to border closings, some employees who usually work in a country have temporarily worked outside that country. This particularly concerns people who own second homes or have family abroad. With the unprecedented rise in telework prompted by the health crisis, this professional nomadism is bringing to the fore new questions regarding current legislation on labour laws, social security system, and immigration rules. Many HR managers are also dealing with new requests from people who want to relocate in a different country or who want to telework in foreign countries this summer…..

The challenges around current Social Security legislation

Summary of the principles

The principle of applicability of a single system and territory under Article 11 of European Regulation 883/2004 of 29 April 2004, stipulates that any person carrying out their activity on the territory of a Member State of the European Union (EU) or who works at least 25% of the time in their country of residence is exclusively subject to the Social Security legislation of that country. As a result, an employee working in France must, in principle, be subject to the French Social Security system, with the exception of special situations such as secondment, in which an employee may, under certain conditions, remain subject to the French Social Security system while working in another country. For employees from countries outside the EU, there are bilateral treaties, with rules governing coverage under the Social Security system.

The situation due to COVID crisis

Based on this rule, any employee who, in the context of the COVID crisis, may have been required to work from another Member State than where they usually work, or who may be required to spend more than 25% of their working hours working from that country, should, in principle, be registered under the Social Security system of that country, unless this activity is temporary.

Nevertheless, as a provisional measure, to avoid the need to change current legislation as a result of this exceptional situation, France, along with several other Member States of the European Union, the European economic area, Switzerland, and Monaco, have agreed that this circumstance should not modify the current Social Security system for cross-border, expatriate, pluri-active, or seconded workers. Supported by the Social Security administration, this flexibility, which was to be applicable until 30 June 2021, has been extended until the 30th of September, while several European countries have even decided to extend it until 31 December 2021. However, this flexibility only concerns specific cases: cross-border, expatriate, pluri-active, or seconded workers as defined by the EU regulation. On the other hand, an employee who usually works in an EU country and independently decides to come live in France while continuing working for their original employer, should not be included in this flexibility, and should now fall under the French Social Security system.

With regard to employees who usually work in a country located outside the EU and, in the context of the COVID crisis, have temporarily returned to work in France, or vice versa, the question of applicable Social Security legislation during this period will depend on what was agreed upon in the bilateral treaties between the countries involved.

Post-COVID crisis rules

If these practices become permanent, the rules under the EU regulation will need to be enforced again, unless there is a special provision for telework, which, in certain cases, would lead to retaining the Social Security legislation of the place of work, that is to say the place of telework. The situation will have consequences for employers, who may need to register with the Social Security bodies of employees’ places of work, sometimes entailing increases of the total wage bill.

The specific conditions for this type of nomadism must, therefore, be examined.

If a limited number of people continue teleworking in another country, either on an ongoing basis or occasionally, the European Commission considers this insufficient to justify changes to the applicable Social Security laws, which must remain those of a person’s principal place of work.

On the other hand, for people teleworking full-time in their country of residence or if teleworking results in their working more than 25% of the time in their country of residence, the situation is more complicated.

In this case, it could be tempting to rely on a secondment or posting scheme. This system allows an employer officially established and carrying out its activities in one country to temporarily second an employee to work on its behalf in another country (provision of a service, exploratory operations, etc.) while retaining the benefit of their original Social Security system.

This solution is not always satisfactory, however, because the situation does not truly meet the definition of secondment:

- on the one hand, the performance of work in another country is related less to the employer’s activity and more to the employee’s wish.

- on the other hand, since secondment is necessarily limited to a maximum period of 24 months, it cannot be an appropriate solution for cases where teleworking is permanently organised in another Member State.

When the operation is implemented with a country outside the EU, where there is a bilateral treaty between the two countries involved, the treaty should be consulted to determine the applicable Social Security system. Where no special provisions exist, there is a risk of dual contributions.

The challenges for applicable labour laws

Regulation 593/2008 of 17 June 2008 on the law applicable to contractual obligations (“Rome I”) lays down the rules for determining the law applicable to employment contracts. In principle, parties are free to choose the law applicable to their contract. But where the parties have not made that choice, the applicable law is that of the employee’s usual place of work.

Therefore, if the parties do not stipulate the law applicable to the employment contract, when an employee usually performs their activity via telework from the territory of a country other than that of the company, where they previously worked, this could have an impact on the law applicable to the contract, unless the teleworking is only for a limited time (such as during a lockdown period, for example). To illustrate, the work relationship between a German company and an employee hired to work in Germany would be subject to German labour laws, unless the parties choose otherwise. If the employee were to subsequently carry out most of their work via teleworking from France, French law would then govern the entire work relationship.

To avoid this, it could be tempting to set down the applicable law in the initial employment contract or in a rider establishing telework. However, this solution does not solve all of the difficulties. Under the European regulation, a choice of applicable law by the parties cannot result in an employee being deprived of the “mandatory provisions” under the law that would have been applicable had no choice been made. Every country has its own “mandatory provisions”.

Consequently, even if, as in our example, the parties choose to apply German law to their contractual relationship, Frecnh mandatory provisions would still be applicable in the case of teleworking from France.

We generally consider the provisions laid down in Article L. 1262-4 of the French Labour Code, which constitute the hard core of the applicable rules in case of secondment (mandatory rest periods, right to strike, non-discrimination, gender equality, etc.) to be mandatory rules under French law. The Court of Cassation has also been called upon to specify which provisions of French law are mandatory rules under French law: among others, these include the rules governing terminations of temporary work contracts[1], those regarding pre-dismissal interviews[2], and those pertaining to working time[3]. Thus, even if it is legally possible to subject an employment contract to a law other than that of the place of work, this practice has a limited interest, given the importance of the rules recognised as mandatory under French law.

When an employee who usually works in a Member State, such as France, goes to telework from a third country, for example the United States, the applicable rules in that country should be used to determine the law applicable to the employment contract.

The challenges in terms of immigration law

For European citizens having the right to carry out a professional activity under the freedom of movement within all of the Member States of the European Union, teleworking in a Member State does not require the implementation of any particular immigration process.

However, the same rules do not apply to nationals of third countries (including UK nationals, since Brexit...). They must request a visa and work permit authorising them to telework in another country.

While the crisis has clearly shown us that certain people can, at the end of the day, work from anywhere via telework, this still runs up against all current legal, social, and tax principles, which, naturally, had not envisaged this unique, unprecedented situation. If these practices become permanent, it will undoubtedly become advisable for European and national authorities to take up the subject and give transnational teleworkers their own legal status.

[1] Court of Cassation, Labour Division, 12 March 2008, No. 01-44.654

[2] Court of Cassation, Labour Divison, 9 June 1998, No. 96-41.929

[3] Court of Cassation, Labour Divison, 28 January 2015, No. 13-14.315