For many employers, the continued risk of COVID-19 has necessitated the transition to long-term “work from home” arrangements. Increasingly, however, employers have faced employee requests to work from other locations, including from other countries. Employers considering authorizing an overseas remote work arrangement should be aware of the various legal issues that may arise. We have set out some key considerations below.
Immigration
Employers should examine whether the employee requires authorization to work abroad from the labour and immigration authorities of the host country where the employee proposes to work, such as a work permit. A determination on this matter often depends on the employee’s nationality and the length of their stay.
Employers should also be cognizant of any immigration and COVID-19-related issues that may arise upon the employee’s return to Canada, including quarantine requirements and border closures that may impact operational needs.
Tax
Employees working in a host country in which the employer does not have operations may put the business at risk of creating a taxable presence in that country and subjecting the employer to corporate tax obligations abroad. Employers should evaluate this risk with respect to the employee’s length of stay and the employee’s position, among other factors. For example, risk tends to be higher where the individual is employed in a sales position, and therefore generating revenue for the company.
Employers should also ensure that they are complying with payroll laws of the host country, which may require employers to report employee pay, to withhold pay for, or make payroll “contributions” (payments) to government agencies like tax and social security agencies.
Mandatory employment protections
Employers should seek guidance on mandatory employment protections in the host country that may be applicable to the employee. Where local protections are greater than in Canada, the employee may seek to rely on them.
The Employment Standards Act, 2000 (“ESA”) may continue to apply if, per subsection 3(1), the employee’s work is “performed in Ontario and outside Ontario but the work performed outside Ontario is a continuation of work performed in Ontario”. A recent decision by the Ontario Labour Relations Board (“OLRB”) has further clarified that for the ESA to apply, some “back and forth” between Ontario and the host location, as well as a clear and definite date and place of return for the employee, are necessary. A remote work arrangement that merely provides for the possibility of a return to a traditional work environment will not suffice to retain applicability under the ESA.
In the past, employers and employees have sought to rely on the ESA by including a “choice of law” provision that expressly states the parties’ intention to have the laws of Ontario apply to the employment agreement, or a similar clause to that effect. However, the OLRB has given little weight to these clauses as they relate to the applicability of the ESA.
Occupational health and safety
Employers should be advised that while very specific health and safety standards set out in Ontario’s Occupational Health and Safety Act (such as forklift training requirements) may be inapplicable to employees working abroad, employers still have a general duty to take every precaution reasonable in the circumstances to protect their workers. This duty exists independently of any applicable health and safety standard established by the host country. Employers should therefore apply the same “due diligence” standard to employees working abroad as they do to employees working in Canada, to the extent that they reasonably can.
Workplace safety and insurance
Where the remotely working employee sustains an injury abroad, the benefits and services under the Workplace Safety and Insurance Act, 1997 (“WSIA”) may remain available to that employee. Where the employee resides in and is usually employed in Ontario and the employer’s place of business is in Ontario, but the accident happens while the employee is employed outside of Ontario, the employee will be automatically entitled to benefits if the duration of employment outside of Ontario is less than six months. Alternatively, upon prior application by the employer, the Workplace Safety and Insurance Board may declare that the insurance plan applies to an employee whose employment outside of Ontario lasts or is likely to last six months or more.
If an employee is entitled to benefits under the WSIA relating to an accident and is also entitled to compensation under the laws of another jurisdiction in respect of the accident, the employee must elect whether to receive benefits under the WSIA or to receive compensation under the laws of the other jurisdiction.
Practical considerations for remote work agreements
Employers should ensure to update workplace policies to clearly set out their position regarding requests to work remotely from abroad, while still carefully considering the particular circumstances of each request. When a request is authorized, the employer should enter into a written agreement with the employee that clearly sets out the terms of the work arrangement.
The remote work agreement should make it clear that the employer retains authority over where work is to be performed, and that any future relocations will require its prior authorization. An agreement that is silent on this issue may leave the door open for the employee to work from different locations than originally agreed upon.
The agreement should also lay out terms regarding cancellation of the remote work arrangement. If remote work is or becomes an essential term of employment—that is, created by the employment agreement, a workplace policy, or by condonation over a long period of time—then the employer should not unilaterally change the terms of employment by simply requiring the employee to return to the office. An employer who does so may risk a claim of constructive dismissal.
If remote work arrangements are properly managed with the above considerations in mind, employers may be able to minimize a variety of legal risks and adopt overseas remote work arrangements.
This blog is provided as an information service and summary of workplace legal issues.
This information is not intended as legal advice.
