Remote working is now commonplace, with technology allowing employees to work from almost anywhere in the world where there is an internet connection.

While remote and hybrid working in the UK are now widely accepted, allowing employees to work remotely from overseas can create significant tax, legal and regulatory risks. An overseas remote worker can potentially trigger corporate tax liabilities and payroll obligations for the employer in another jurisdiction. Employers may also find that the employee becomes subject to local employment protections, or that the arrangement creates regulatory issues, particularly in highly regulated sectors such as financial services.

We often see employers recall employees to the UK once these overseas risks have been identified. But what is the position when an employee is told they cannot work abroad but they do so anyway? A recent employment tribunal case highlights the issue.

What happened in Malyk v Teleperformance Contract Ltd?

In this case, the employee asked if she could relocate from Bristol to France. The employer’s Bristol office had closed, and she was already working remotely from home. The employer had an associated company in France, but it was reducing its French workforce following the loss of a major contract. The employer was also concerned about creating corporate tax, payroll or employment law obligations for the UK company. The request was therefore refused.

Despite this, the employee moved to France and started working there. When she refused to return to the UK, she was dismissed.

Contractual requirement to work remotely only in the UK

The employee argued that her employment contract did not expressly say she could not work overseas, while the employer argued that it did not expressly permit overseas working. The judge found that there was an express contractual requirement to work in the UK because:

• The employee’s home address was given in the contract as an address in Bristol
• The contract described her principal place of work as “home office”
• The contract had various references to UK law, including the need to be eligible to work in the UK.

Remote working policy should have been communicated better

The employer had a hybrid working policy on its intranet, but it was not specifically communicated to remote working employees. The judge said that this could have been communicated more effectively, particularly to employees working remotely, but the poor communication of the policy did not make the dismissal unfair.

Was the employee treated consistently?

The employee alleged other individuals had been allowed to work overseas. However, in each case, the individuals had either been transferred to a local entity where possible or their position had been dealt with differently based on the facts.

In one case, an employee had overstayed in Portugal without the employer’s knowledge. He was instructed to return to the UK, which he did, but subsequently resigned before moving back to Portugal and being engaged by the Portuguese entity as a contractor. The key point was that he returned to the UK when instructed to do so.

Was the instruction to return to the UK reasonable?

In the case between Malyk and Teleperformance Contract Ltd, the tribunal agreed that the employer’s instruction not to work from France was a reasonable management instruction. The employee’s contract required her to work from home within the UK, and working from France put the employer at risk by creating tax and legal issues.

When is dismissal for overseas working fair?

The employer dismissed the employee on the grounds that allowing her to work from France while employed by a UK company would breach French law. The tribunal agreed this was fair, even though her working from France did not cause the employer any actual legal or tax consequences.

Crucially, her contract required her to work in the UK. She had refused to comply with a reasonable management instruction to return to the UK and the employer was entitled to require her to comply. On the facts, the employment tribunal found in favour of the employer.

How can employers manage overseas remote working risks?

To reduce the risk of disputes over remote working overseas, employers should make it clear in employment contracts where the employee is required to work, including whether this is limited to the UK. Remote working policies should also be clear on whether overseas working is permitted, how requests will be assessed and who has authority to approve them.

This is important because we often see situations where a line manager has informally agreed to overseas working without following company procedure. Employees should also be specifically notified about the policy and the obligation to always follow it. At the same time, employers need to apply their policies consistently. Allowing one employee to work overseas can create expectations for others, so care should be taken in every case.

For more information on managing the tax, legal and employment risks associated with employees working overseas, please get in touch with Jo Webber, Charlie Barnes or your usual RSM contact.

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