The IT business involves constant interaction with counterparties from different jurisdictions. In addition, it is likely that your company will also be registered in one of the foreign jurisdictions.
Imperative norms, which cannot be changed by the consent of the parties, are categories of cases in which it is impossible to choose the place of dispute resolution – this is only a small part of what can be encountered in multijurisdictional legal relations in the IT sphere.
Despite the above, the Internet is overflowing with examples of various contracts, usually of poor quality, the use of which carries many hidden risks: they may be prepared in accordance with the norms of outdated legislation, do not meet the goals of your company, designed for use in other countries, may contain provisions that are harmful to your interests and much more. We, in turn, do not offer one package of identical standard contracts for all our clients, despite the widespread practice of such actions in the market.
“Hiring de jure independent contractors and de facto employees” sound familiar? Most likely you decided to hire independent contractors (registered as IEs in their country of residence) as developers under service contracts for your company registered in the United Kingdom, Estonia, Delaware, California, or any other jurisdiction. Have you bypassed the system by getting rid of the enormous amount of social security benefits that the government requires you to provide to your employees? Certainly yes, but are you sure that tomorrow the local labor market regulator won’t ask you why there is only one director of the company? We are not suggesting that you give up your usual work models, but we advise you to update them in a more thoughtful configuration by contacting the experts.
We can help draft employment contracts that will fully comply with legal regulations and protect the interests of the company. Legarithm attorneys have significant experience in creating the most optimal systems of relationships with permanent employees, contractors and individual entrepreneurs.
How do I determine whether there is an employment relationship?
In the EU, the most common definition of an employee is based on the following characteristics, derived from the decision of the Court of Justice of the EU:
– Services performance
– Certain period of engagement
– Relationship of subordination, the presence of which is the most important part of the test
– Payment requirement
In turn, the state of California has established even more stringent requirements, enshrining the principle of negative regulation, so, in accordance with the Law of 01.01.2020 if the company can not prove that an individual:
1. free from the control of the hiring entity in connection with the performance of the work, both under the contract and in fact;
2. performs work outside the usual scope of the employing entity;
3. involved in independent activities of the same nature as the work being performed,
— then there is a presumption of the existence of an employment relationship.
The rules regarding the distinction between employees and independent contractors are getting stricter all over the world and it is especially important to always be one step ahead so as not to be penalized by the supervisory authorities, Legarithm lawyers can help you with this, please contact us in our chat room for an initial consultation.