If anything has been strengthened by the current COVID-19 pandemic, it is undoubtedly telework as a form of providing services that is not reserved exclusively for certain sectors, companies or positions. However, if we observe the phenomenon from an international perspective, the truth is that it poses a number of challenges for both companies as well as workers, especially in cases in which telework is performed in a different country to that of the company’s head office.

At present, there are numerous companies adapting their human resource policies to implement telework as a tool to attract and retain talent at a global level, without the physical location of the employee restricting his/her employment.

From a labor point of view, several questions could be asked in relation to the possibility of hiring workers from other countries to that in which the company is located, to work remotely and normally from their country of residence. In this regard, the questions that may arise would be (i) what are the applicable labor regulations and (ii) what is the applicable Social Security contributions regime in such case?

To answer the first question, the Rome I Regulation would apply (as the private international legal framework), which states that, as a general rule, the labor legislation applicable is agreed by the parties or, in the absence of agreement, that of the country in or from which the worker habitually performs his/her work under the contract. By default, the law of the place of the contracting establishment would apply and, finally, the law of the country to which the agreement is most closely related.

If an agreement is reached on the law governing the employment contract, it cannot deprive the worker of the minimum legal provisions applied in the place in which the services are provided.

These differences are evident when the labor laws of the two countries are particularly different, such as in a labor relationship between a company domiciled in the USA and a “digital” worker hired by the company in the European Union (where the labor law is, in general, more protectionist than in the United States).

The mention of habitual is therefore a key factor for these effects, however there are also other considerations, such as Social Security contributions.

Indeed, the general rule of contribution is based on contribution in the place in which the services are habitually performed (except, mainly, in cases of temporary transnational displacement, in which case and depending on the legislation or Social Security bilateral treaties that exist, contributions could still be made in the country of origin).

Other issues that are also of particular importance are those of a tax nature, which particularly affect the structure of an international labor relationship based on telework (physical residence, double taxation agreements, etc.).

Finally, other questions also arise frequently in connection with the implementation of remote work in another country that are not strictly legal-labor issues. Some examples are:

  • The impact of the company’s human resources culture and cohesion of its teams.
  • The potential salary differences between “digital” workers and those workers with similar positions that provide services in person at the company premises.
  • The international processing and transfer of data, as well as the necessary security systems for that purpose.

In short, the issue is one of obvious advantages in an increasingly global and digitalized environment, however the different cases arising in this context must be closely studied from different angles, with the ultimate objective of ensuring that the opportunity is not converted into an international problem.

Sergio Santana

Garrigues Labor and Employment Law Department