Why should you be a compliant remote employer? 5 critical reasons to avoid legal risks

We have spent the last few weeks covering in detail the risks that companies, distributed or not, run when working with independent contractors long-term. With repercussions for everyone involved, we hope this has given you some food for thought. If any of it applies to you, in this post, we would like to give you five clear reasons why you should be a compliant remote employer.

There are various laws and regulations that any employer in any country needs to comply with. Previously, we talked about the dangers of misclassification if you work with independent contractors and do not adequately employ them. Fines, lawsuits and even prison time are real dangers you might have to deal with for breaking this fundamental employment rule in your home country. However, when you work with people in different jurisdictions, your liability extends beyond just the country your company is based in and covers the workers’ countries as well.

This means that the consequences you are facing could be double, triple or multiples more depending on the number of countries people are spread across. As a remote employer, the fact that you do not have a legal entity present in that country will not shield you if you are compliant.

To prove the point, I will tell you a story from France, a few years back. Mr D. was working as a contractor for an American company, serving as their representative in France. He was happy to be a consultant and bill his one client once a month because he was hoping to build a client base over time. As time went by, it became apparent that Mr D would not be able to create a multi-client consultancy.

He was fully occupied by working with the American company, leaving him no time to devote to anything else. He wasn’t even allowed to have an assistant. When his contract was finally terminated, he filed a case against the American company in a French court for misclassification. Not only did the French court find the American company guilty, but it also imposed fines on all accounts and ruled that the company had to grant:

• The lump-sum compensation for concealed work
• Paid holidays
• Compensation for non-compliance with the dismissal procedure
• Compensatory payment for related notice and paid leave
• Statutory dismissal indemnity
• Indemnity for dismissal without real and severe cause
• Payment for the damage linked to the absence of employer contributions
• Precariousness indemnity
• Salary reminders for the year 2014 and related paid holidays
• Damages for the lack of financial compensation for the non-competition clause, which had been drafted according to the standards of American law.

In the words of Mr D’s solicitor, Marc Powell-Smith, “the total of these requests was high and constituted an unforeseen expense for his American employer.” The fact that an ocean divided the two countries didn’t save the American company from the stringent French labour law.

Remote comes with a higher degree of autonomy for individuals, which is among its biggest benefits. However, that means that, as their employer, you don’t know when they are working and when they aren’t. This carries a significant risk that people will work too much.

The blurring of work and home life is happening as is, and with remote work, there is a greater danger in that. Burnout, which was officially labelled as an occupational phenomenon disease by the World Health Organisation in 2019, is the obvious worry to have; however, in some countries, overwork can have legal consequences too.

Working remotely is often governed by requiring the delivery of specific work by a given deadline, instead of doing so within set working hours. While this gives a lot of freedom for remote workers in terms of organising their time and doing things that office-based employees may not be able to, it exposes the company to risk around not providing the break and rest periods stipulated by the law.

In the EU, for example, as an employer, you must ensure that your staff does not work more than 48 hours per week on average (including overtime), over a reference period of up to 4 months. Your employees must be given at least 11 consecutive hours of daily rest and at least 24 hours of uninterrupted weekly rest. To ensure these regulations are implemented, countries like France have passed the “Right to disconnect law”, which governs this even more stringently.

On the flipside of remote workers putting in too much time is the fact that they may also be putting extra time into work for other clients, in case they are independent contractors. That is because, in most countries, in order to be correctly classified as a contractor (vs. an employee), they must have multiple clients. You cannot expect them to give your company 100% focus or dedication on the grounds that they have to give their time and attention to others, too. Employing them properly would secure the exclusivity.

Instead of reimbursing expenses after they have been incurred, companies may opt to give company credit cards to remote workers. The use of such a card can be very clearly stipulated within an employment contract. However, with a commercial deal by which independent contractors are regulated, the use or misuse of something like a company credit card is more challenging to govern. In case of misuse, getting back the money would be difficult. You do not have the law on your side because, as an independent contractor who doesn’t have close ties with the company, the individual probably shouldn’t have been given a company card in the first place.

Working in global operations and HR for companies previously, I have felt a big responsibility for the company’s workers. An important upside of employing people legally and compliantly is that it removes a lot of unnecessary stress. I have experienced it first-hand, at times when I have had to pay the salaries of over 100 people around the world, some of whom were independent contractors.

It is no exaggeration to say that I have sometimes lost sleep over it. Knowing that people have been paid on time with taxes filed, benefits accounted for, is not usually the achievement or win that companies might celebrate with fanfare. You don’t get a “you smashed it” comment, but to me, it has felt like I did.

Beyond monthly pay, I have worried about what would happen if an independent contractor had an accident, developed a chronic condition, or simply got pregnant. I know from personal experience how limited the support can be for independent contractors. Getting to bask in the glow of ensuring workers are well taken care of is definitely not to be underestimated.