Remote work and “employer of record”: Employment in the video game industry | In Principle

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Remote work and “employer of record”: Employment in the video game industry

The game development industry knows no boundaries, and often attracts workers from all over the world. But employment and immigration regulations pose a barrier to drawing on the resources of the global labour market, particularly when a game development studio considers employing persons in Poland who are citizens of countries outside the EU, the EEA, or Switzerland. However, new non-standard forms of work help overcome the difficulties in hiring foreigners, and are worth considering for roles such as programmers, graphic designers, sound engineers, script writers, and game testers.

Civil contracts—immigration problems remain

Civil contracts such as contracts of mandate and service contracts have been broadly applied for years in the game development sector as a way to work around the labour-law regime.

But they do not solve the problems connected with the need to legalise foreigners’ work and stay in Poland. In many countries which allow at all for the possibility of working under civil contracts as an alternative to an employment contract (in Poland this is possible so long as the contract is not performed under conditions reserved for the employment relationship), hiring under such a contract still requires (as in Poland) an employment permit or other permit.

Hiring through an agency—only temporarily

A basic solution partially addressing both problems (i.e. the need to legalise the foreigner’s work and performance of all of the employer’s labour-law duties) is to hire the foreigner via an employment agency.

This solution can eliminate, or more precisely shift to the agency, most of the formalities and duties connected with hiring a foreigner and legalising his stay in Poland. The exceptions include certain obligations related to annual leave, working time, and occupational health and safety.

But this solution has one fundamental drawback. In many countries there are restrictions on the maximum period for which an employer may use the work of a temporary employee. That is also the case in Poland, where this period is generally a total of 18 months within a period of 36 successive months, regardless of how many agencies intermediate in the employment. Thus this solution will work when there is a need for temporary reinforcements for a specific game project, but does not allow for formation of long-term cooperation. This may be an adequate solution for some productions but not others.

When using temporary work via an employment agency, the employer should properly secure its interests in the area of intellectual property rights, and ideally contractually ensure the transfer of all IP generated by the temporary employee.

Due to the time restrictions on temporary work, many employers seek other solutions, particularly turning to outsourcing (to which we will devote a separate article). But it should be borne in mind that in the case of foreigners, using outsourcing is fairly risky.

Remote working—an ideal solution (not entirely)

Another solution is the remote working model, in which the employee is hired directly by the employer but performs his work at a distance, in a country other than the one in which the employer has its registered office and conducts its operations (and thus the employee may work at home, in a rented office, or anywhere he finds himself at the time). Often it is employees themselves who insist on this approach, as they do not always wish to live and work in the country where the potential employer operates, particularly if the work does not require their constant or frequent presence at a fixed location.

As a rule, remote work solves the problem of the need to legalise the employee’s immigration status, and thus obtaining a work permit or residence permit, which under current conditions is fairly time-consuming (taking from a few weeks to a few months). A short-term visa usually suffices for any necessary but brief work-related travel.

Moreover, the law in many countries, including Poland, does not require a foreign employer to have any organised form of activity in the country from which the employee works. The Polish regulations do not even mandatorily require a foreign employer hiring a worker in Poland to be registered in Poland as a remitter of personal income tax or (if a relevant agreement is concluded with the employee) social insurance contributions due on the employee’s salary.

However, remote work makes it necessary to apply at least some of the regulations of the foreign country from which the employee works. This is because the place of performance of the work is a factor which in many jurisdictions determines the law governing the employment contract between the parties. This is the case under Rome I (Regulation (EC) No 593/2008 on the law applicable to contractual obligations), which is applicable in Poland. While the parties to an employment contract may make a choice of the law governing the contract (e.g. the law of the state where the employer has its registered office), such choice must not deprive the employee of the protection he is entitled to under the mandatory regulations of the law that would apply if no choice of law were made (regulations that cannot be excluded by agreement of the parties). This means that if the law of the country where the employer has its registered office is chosen, it will still be necessary to apply at least the mandatory regulations of the law of the country where the work is performed. And in the case of Poland, the great majority of provisions of the Labour Code and other employment regulations are mandatorily applicable.

Significantly, under Polish labour law, the model of remote working described above entails for the employer certain additional duties with respect to the terms of the contracts concluded with the employee, internal policies, and also benefits and duties involving occupational health and safety.

The fact that the employee resides in a country different from the one where the employer’s registered office and operations are located also often means that in the event of a dispute arising out of the employment relationship, the employee will have a right to file suit with a court in the country where he performs work. In Poland this is provided for in the Civil Procedure Code (Art. 1103 and 11034 §1).

“Employer of record”—formal employer and de facto employer

Employers’ use of the services of entities acting as “employer of record” is gaining popularity in Poland as an alternative to temporary employment, and particularly to the model of direct employment combined with remote working. This model is especially popular in the IT sector in the US and the UK.

In reality, this solution is a form of employment outsourcing (employee leasing) combined with remote working. It consists of separating the employer’s rights and duties (the legal sphere of the employment relationship) from the actual benefit of the employee’s work. In this model, the employee performs work remotely in a country different from the one in which the entity benefitting from his work is located, while that entity does not formally employ the worker. The worker is employed by another entity—the “employer of record”—registered and operating in the country in which the employee performs work. From the formal and legal side, it is this entity that is responsible for executing all the rights and duties of the parties to the employment relationship, and also all public-law obligations connected with employing the worker. In this arrangement, the employer benefiting from the employee’s work is a client of the formal employer of record.

This solution thus lacks the fundamental “defect” of the model of direct employment and remote work, consisting of the need for the entity benefiting from the employee’s work to apply the law of another country.

However, a drawback of this model (as in the case of outsourcing) is the need to rely entirely on the entity employing the worker to enforce any rights with respect to the employee, as well as perform public-law obligations. Depending on the jurisdiction, liability to the authorities of the state in which the work is performed may enter into play.

As when using the services of a temporary employment agency, the game development studio should contractually secure passage to the studio of all IP rights generated by the employee in this model.

It should also be stressed that this solution, like outsourcing or employee leasing, raises doubts under Polish law because it is not expressly regulated. The risk, particularly from the perspective of a Polish entity benefitting from the work of a foreigner formally employed abroad by an employer of record, is a determination that an employment relationship exists between the Polish entity and the foreigner. Under this arrangement, the level of risk will depend on the circumstances of the case. The likelihood of this occurring is relatively low, however, because for a finding of the existence of an employment relationship between the beneficiary of the employee’s work and the employee to be made for the purposes of labour law, under the labour law it is necessary for the labour court to issue a legally final judgment pursuant to a claim filed by the employee (who typically will have no interest in filing such a claim) or by the State Labour Inspectorate (which in practice will have very limited scope for disputing the solutions applied in relation to a person permanently present in another country).

Magdalena Świtajska, adwokat, Employment practice, Wardyński & Partners