Global employment laws are constantly changing as employee rights expand and evolve around the world. At any given time, there are numerous new laws and policy proposals coming into play, such as the U.S. Federal Trade Commission’s new rule banning non-competes, the EU directive on platform workers, and the proposed right-to-disconnect bill in California.
It’s a lot to keep track of, but for companies with a globally distributed workforce (or those considering global expansion), it’s crucial to stay on top of legislative changes in order to ensure compliance across multiple countries and jurisdictions. Failing to do so means risking fines, legal consequences, and reputational damage.
To offer insight into current trends in global employment legislation, Oyster’s General Counsel Miranda Zolot and Assistant General Counsel Sarah Stephens sat down with Courtney Vinopal, a reporter for HR Brew covering compliance, to talk about new employment regulations and ongoing risks that may impact businesses. Their wide-ranging conversation included non-compete agreements, right-to-disconnect laws, misclassification risks, employee travel policies, and more—as well as actionable strategies to stay compliant.
Non-compete agreements
The U.S. Federal Trade Commission’s new rule on non-competes not only bans them nationwide, but also broadens the definition of a non-compete. The rule, which goes into effect in September 2024, marks a significant shift in employment and competition law, and is intended to increase job mobility and wages for workers, as well as generally improving the economy.
What do employers need to know about the non-compete ban?
The first thing employers need to know is that the non-compete ruling applies to all workers, regardless of level, and across all industries.
Second, the rule’s expansive definition of a “non-compete” will limit an employer’s ability to utilize other types of restrictive covenants, like non-solicitation agreements, where they are written broadly enough that they function de facto as non-competes. In other words, it bans any term or condition of employment that prohibits, penalizes, or prevents a worker from:
- Seeking or accepting work in the U.S. from a new employer after the conclusion of their current employment; or
- Operating a business in the U.S. after the conclusion of employment.
The only exception is non-compete clauses connected to the sale of a business. When selling a business, part of the value of that sale may be tied to customer lists and customer relationships and the buyer will not receive the benefit of their bargain if the former owner immediately starts a new business that does the same thing as the business they have just sold.
Keep in mind also that the rule is retroactive and requires notice. This means employers must inform both current and former workers with existing non-compete agreements that these will not be enforced once the rule becomes effective.
The rule does allow employers to grandfather in current non-competes for “senior executives,” defined as individuals who earn more than $151,164 annually and who are in policy-making positions. However, there can’t be any new non-competes going forward, assuming the rule goes into effect as scheduled. Keep in mind that the rule is currently subject to multiple legal challenges, including by the U.S. Chamber of Commerce.
What should companies with U.S. employees do to prepare for the non-compete ban?
First, consider pausing their use of non-competes. Even though the law doesn’t go into effect until September 2024, now might be a good time to stop creating new non-competes. Check existing agreements to see if you’ll need to rescind any non-competes of current or former employees. If so, provide notice to all impacted employees.
Next, update your employment agreement templates to remove non-competes and ensure that you’re including allowed provisions to safeguard your corporate IP and trade secrets. These can include narrowly drafted nondisclosure agreements, confidentiality provisions, or non-solicitation clauses.
For key employees, you might want to sign new agreements with stricter confidentiality or non-solicitation clauses (as long as they’re tailored narrowly enough not to violate the non-compete ban). You may also want to evaluate other ways to protect your trade secrets, like installing data protection software or developing and administering trade secret and data security training.
The right to disconnect
There are various policies being enacted globally to promote a more healthy work culture. After all, work-life balance isn’t just a problem for employees, who often end up taking leave due to stress and burnout—it’s also a problem for employers, both in terms of costs and the disruption it causes.
To address these issues, countries like France, Spain, Portugal, and Australia have passed right-to-disconnect laws to ensure that workers have the legal right to refuse to check or respond to work-related emails or messages during non-working hours. This type of legislation is growing in popularity and has spread to the U.S., where a right-to-disconnect law was proposed recently in the California Assembly.
Even in jurisdictions where there isn’t any specific right-to-disconnect law in place, global employers should be aware of the already existing rights of employees in some countries, like Germany and Switzerland, to a specific amount of break time between work shifts that must be respected.
Pros and cons of right-to-disconnect laws
Right-to-disconnect laws and policies that protect employees’ personal time are intended to prevent burnout, protect employee privacy, and reinforce healthy boundaries. It can help employers by preventing expensive and disruptive sick leaves that occur when employees get too burned out.
However, in a remote environment, the right to disconnect can strip employers and employees of flexibility in when and where they work. For instance, remote workers often value the ability to choose their own hours, even if it means putting in a few evening hours in order to take the afternoon off. A law that clearly sets forth working and non-working hours could affect the level of flexibility remote employees are used to, which is why there’s already some pushback against the proposed law in California.
How can global employers adapt to right-to-disconnect laws?
If you have a remote-first, globally distributed workforce, it’s a good idea to create policies and cultural practices where employees work with their managers to set expectations around working and nonworking hours to ensure that they’re getting enough rest. This is something distributed companies should do regardless of whether they’re subject to right-to-disconnect laws.
In addition, you can facilitate collaboration across time zones by leaning into asynchronous work practices. For example, you can set meeting agendas in advance so everyone can comment, and then record the meeting for anyone who isn’t able to attend. Be clear about work hours and regularly reinforce that people aren’t expected to respond to emails right away, but should do so in their own working hours. Healthy work-life boundaries can be baked into company culture, regardless of whether it’s required by law or not.
Contractor misclassification
There are currently about two billion people worldwide who are informally working as contractors, gig workers, or temporary workers. When companies make their first cross-border hire, it’s very often a contractor. That’s a perfectly valid strategy that doesn’t require setting up an entity or having to figure out all the details of employment, health and safety, and tax laws in another country.
When should employers hire contractors?
Contractors are ideal if you have work that’s temporary or project-based and can be done independently. They’re also helpful when a company is making an initial foray into a new market or a new service line. For instance, if you’re wondering how your product might fare in Bulgaria, you might hire a contractor there to test the market and gather data. As long as it’s a time-bound experiment, it’s a good way to understand a particular market.
What are the risks of hiring independent contractors?
There’s always some level of risk involved in hiring a contractor, especially as government agencies around the globe crack down on gig work and other types of informal employment to ensure that workers are being afforded the proper protection of both employment laws and health and safety laws. If workers are found to be improperly classified, there can be legal and financial consequences for employers, including lawsuits, regulatory fines, payment of back taxes, and more.
To minimize risk, you need to ensure that your contractors really are working independently (on their own time and with their own tools) on specific projects and not doing business-critical work. Remember that it’s the nature of the work and the working relationship that determines the worker’s status, not the contract.
Recent legislation regarding independent contractors
The U.S. Department of Labor recently revised and updated its guidance on independent contractors, with a multi-factor test to curb worker misclassification. The test focuses on the actual working relationship rather than the contract. In other words, it considers who is controlling the manner of work, the tools of work, the way the work is delivered, and so on, to determine whether the contractor is indeed working independently or being controlled or directed like an employee.
Another recent development is the EU’s directive on platform workers which established a new framework for determining the employment status of almost 28 million European workers on various online platforms. The directive introduces a legal presumption that a person working through a digital platform is an employee if certain conditions are met regarding the employer’s control and direction over the work. Member States will have two years to incorporate the provisions of the directive into their local laws.
Oyster offers a free misclassification analyzer to help companies determine if a contractor is at a high, moderate, or low risk of misclassification. If there is indeed a high risk, you may consider converting the contractor to a full-time employee.
Global mobility and employee travel policies
With the rise of remote and distributed work, people have become more mobile and it’s now common for employees to want to travel while working. But even though the world feels small when we connect with friends and coworkers over our screens and keyboards, the reality is that there are legal risks involved when employees travel and work outside of their home jurisdiction.
What are the implications and risks of employee travel?
What employers and employees need to remember is that every state, province, and country has its own rules and regulations governing the right to work, personal income tax, social security and payroll taxes, corporate tax liability, labor and employment regulations and entitlements, and many other areas of law that impact businesses and their employees.
In other words, when employees work in another jurisdiction, there are many different areas of law that can potentially come into play. This creates significant risks for employers, who are responsible for, among other things, making sure that they’re withholding social security and payroll taxes correctly and in the right jurisdictions.
Creating employee travel policies to mitigate risk
Employee travel policies will be unique to each company because it depends on your workforce, your company culture, and your risk tolerance. Businesses have to strike a balance between promoting employee flexibility and enforcing travel policies to maintain compliance. This might mean considering what your employees want, where they’re located, your values as a company, and your organizational risk tolerance. Consult with legal and tax experts when crafting your policy, and also be mindful of cultural factors like passport privilege.
Staying ahead of legislative changes
Laws are constantly changing and keeping up with even just employment law changes on a global scale is a full-time job. At Oyster, we have several people who monitor such changes and manage the process of modifying our employment agreements, policies, or processes to keep us compliant.
If you don’t have that kind of machinery in place, there are other things you can do. Subscribe to law firm newsletters or listservs, and set Google alerts for the jurisdictions where you do business.
The good news is that employment laws don’t change overnight. It can take several months or even years for new legislation to go into effect. Often, there are often legal challenges once a new law is passed, and courts move slowly. So as an employer, you’ll have plenty of lead time to implement whatever changes are required to ensure compliance.
For more expert analysis and insights on global employment legislation and compliance, check out the recording of Legislation Lowdown with Miranda Zolot and Sarah Stephens. Or if you’re wondering how to hire compliantly across borders, learn how Oyster can help you expand globally while ensuring compliance worldwide.
