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 593/2008on
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 should also be classified as
“teleworking,” which entails for the employer certain additional duties
with respect to the terms of the contracts concluded with the employee,
and also duties involving occupational health and safety (in practice
largely not feasible for the employer to execute, but also to verify for
the authorities overseeing compliance with employment regulations).

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
gradually 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