COVID-19 has sparked a seismic change in the workplace as many companies have found that working from home (“WFH”) has not diminished employee productivity and that employees prefer its greater flexibility. Given that—and the potential for saving on overhead costs—many companies have announced plans to adopt long-term WFH policies and close or realign office space. The OECD and several countries including the US, UK, Ireland, and Australia have issued guidance that excepts employees temporarily dislocated outside their employer’s country from creating unintended permanent establishments (“PE”)—but long-term WFH employees are not similarly excepted. The US, in particular, has thus far only officially extended PE protection for temporary dislocations of up to 60 calendar days that begin within the emergency period of February 1, 2020 through April 1, 2020.

While many employees that WFH do so from the same country as their employer, that is not always true, and so companies would be wise to perform their due diligence. To that end, this post analyzes some PE issues that a company should consider before it adopts a long-term WFH policy.

Treaties or Domestic Law

When analyzing a long-term WFH policy, a threshold issue is to determine which sources of law apply. Generally, domestic laws govern which transactions give rise to taxable income in a country in the first instance. For example, the Internal Revenue Code provides that the US may assess tax on a foreign taxpayer’s income effectively connected with a US trade or business. On the other hand, entities that qualify for the benefits of a bilateral tax treaty can choose to apply the treaty instead of domestic laws. Under the OECD Model Income Tax Convention (“OECD Model Treaty”)—the principles of which are reflected in most bilateral tax treaties—a taxpayer has a taxable presence in another country only if it has a PE in that country. The choice of applying domestic law versus an applicable treaty to determine taxable presence is critical: for instance, although a PE is generally a higher threshold than a US trade or business, there may be some cases where a US trade or business has no effectively connected income even through a PE may have attributable (and taxable) profits under the same facts.

Article 5 of the OECD Model Treaty and Service PEs

Under Article 5 of the OECD Model Treaty, companies can form a PE in a country in one of two ways. First, a company resident in one country may form a PE by a having fixed place of business (“FPOB”) in another country, which subject to certain exceptions includes a place of management, branch, or an office, among other things. Important to the FPOB analysis is that the location (1) must be used longer than temporarily and (2) merely needs to be at the disposal of the enterprise, which includes non-exclusive space. Second, a PE may arise for a company through the actions of a “dependent agent,” even if it doesn’t otherwise have a FPOB. Specifically, a dependent agent PE may arise in a country where a person acts on behalf of an enterprise and habitually concludes contracts binding on it.

Moreover, certain tax treaties also provide an objective test for a third category of PEs based on performing services in another country for a given period. For example, the US-Canada Income Tax Convention states that even if an enterprise does not have a FPOB or dependent agent PE, a PE still exists if an individual performs services in either country for more than 183 days per year and accounts for more than fifty percent of an enterprise’s revenue.

At-Home Offices

OECD Model Treaty commentary provides that carrying on company activities at an employee’s at-home office does not always indicate that the location is at the disposal of an enterprise. But where an at-home office is continually used for company activities and it is clear that the company requires the employee to use that location—which may be the case where an employer does not provide an employee with any office space—the at-home office may be deemed to be at the disposal of an enterprise and give rise to a PE. As a result, a company with an employee that works or commutes from abroad should be cautious about instituting a mandatory WFH policy and should consider maintaining space for him or her in its building.

Use of Foreign Offices

Although WFH is suitable for many office tasks, inevitably there are duties that need certain facilities, devices, or services found in a traditional office environment. But even if a multinational entity group wants to adopt a more flexible work arrangement, it will still need to be cautious about making office space in foreign countries available to remote employees. For example, consider an employee that generally works from an at-home office in Country A but works for and maintains an office at the parent company’s building in Country B. If the parent company also allows that employee to access the facilities of a subsidiary located closer to the employee in Country A to perform tasks as needed, the parent company may form an unintended PE in Country A. According to OECD Model Treaty commentary, such a PE may be formed anytime the activities of an employee are regularly conducted at the facilities of a subsidiary or other related company.

Concluding Contracts

In addition, a company should pay special attention to where employees are located when they negotiate and approve contracts—a consideration that will become especially important if the company has implemented a long-term WFH policy. As discussed, the OECD Model Treaty provides that a PE may arise where a dependent agent, i.e., employee, habitually exercises an authority to conclude contracts that bind a company. Unlike a FPOB PE, a dependent agent PE may arise from an employee’s at-home office even if the employee is not required to work there. In addition, companies need to be mindful of more than just where employees are located when they sign contracts. According to the OECD Model Treaty commentary, a contract may also be deemed concluded for purposes of a dependent agent PE simply by accepting an offer, or by fully negotiating the elements and details of a contract in a way that binds an enterprise.

Potential Silver Lining

Although adopting a long-term WFH policy may generate new PE risks, the overall impact of COVID-19 may reduce other PE risks. Reductions in business travel, use of virtual meetings and contract negotiations and fewer employee secondments may reduce the prevalence of both dependent agent and FPOB PEs that may have previously arisen from a pre-pandemic highly mobile workforce.


The guidance that the OECD and various countries have issued that excepts COVID-19 displaced employees from forming PEs does not apply to companies that adopt long-term WFH policies. Thus, before doing so, companies should perform functional analyses of its employees activities, at-home office locations, and the spaces it makes available to them to prevent forming unintended PEs.

On March 30, 2020, US Citizenship and Immigration Services (USCIS) announced that the agency would allow flexibility in responding to certain agency notices, in an effort to minimize the effect of the COVID-19 pandemic on individuals seeking immigration benefits.  The agency provided an additional 60 calendar days beyond the due date for responding to the following notices:

  • Requests for Evidence;
  • Continuations to Request Evidence (N-14);
  • Notices of Intent to Deny;
  • Notices of Intent to Revoke;
  • Notices of Intent to Rescind and Notices of Intent to Terminate regional investment centers;

This flexibility applied initially to notices issued between March 1, 2020 and May 1, 2020.  The window was later extended to notices issued between March 1, 2020 and September 11, 2020 and now, by agency alert posted on September 11, 2020, individuals receiving one of the specified notices, issued between March 1, 2020 to January 1, 2021, will have an additional 60 calendar days within which to respond to USCIS.

In addition, USCIS will consider a Form N-336, Request for a Hearing on a Decision in Naturalization Proceedings (Under Section 336 of the INA); or a Form I-290B, Notice of Appeal or Motion, it receives up to 60 calendar days following the date of the agency decision to have been timely filed.  Such filings are normally due within 30 calendar days of the agency decision.

In a joint press statement with the Indonesian government, starting September 18 the Japanese government will begin accepting requests for travel for essential business purposes and official travel to and from Singapore. Permitted travelers will be required to submit proof of a negative PCR test result both prior to departure and upon arrival, as well as adherence to a controlled itinerary for the first 14 days while in the receiving country. Such travelers will not be subject to the 14-day self quarantine measure that is currently required for permitted travelers between the two countries. While this entry procedure will launch September 18, actual travel to and from Singapore will begin one or two days afterwards.

Full coverage of this issue may be found on Mayer Brown’s COVID-19 blog.

The new rules serve to implement Directive (EU) 2018/957 of 28 June 2018 (“Amending Directive”) amending Directive 96/71/EC (“Posted Workers Directive”) concerning the posting of workers in the framework of the provision of services.  The aim of Directive (EU) 2018/957 is to balance the relationship between the freedom to provide services as protected under EU law and the guarantee of equal competitive conditions, on the one hand, and the protection of the rights of employees posted by their employers across borders, on the other. Pursuant to the Amending Directive the catalog of terms and conditions of employment applicable to posted workers in the EU member state to which they are posted is extended. Furthermore, employees who are posted for more than 12 or 18 months, respectively, shall be subject to all mandatory terms and conditions of employment of the EU member state to which they are posted, but for a few exceptions. The conditions under which posting allowances can be credited against the remuneration prescribed in the EU member state to which the employees are posted are clarified. Also, the applicability of the Posted Workers Directive to certain employment leasing companies is clarified and certain information obligations are introduced.


The most important changes to the German Act on the Posting of Workers are as follows:

  • The catalog of working conditions regulated by legal and administrative provisions, which must also be observed by employers domiciled abroad, was expanded. Not only minimum wage rates will apply, but all wage conditions, i.e., base remuneration, including remuneration components linked to the nature of the work, qualifications and experience of the employee and the region, as well as allowances, supplements and gratuities, including overtime rates. It is furthermore clarified that the regulations on safety, health and hygiene at work also concern accommodation provided by the employer.
  • Posting allowances can generally be credited against the remuneration paid to posted workers – this does not apply though, if the posting allowance is paid to reimburse costs actually incurred as a result of the posting (in particular, costs for travel, accommodation and board).
  • The catalog of working conditions regulated by collective bargaining agreements, which must also be observed by employers domiciled abroad, is extended. Nationwide generally binding collective bargaining agreements will apply not only in the construction industry, but in all sectors under the Act on the Posting of Workers to employers based abroad if they employ workers in Germany. Such generally binding collective agreements apply with regard to all wage conditions.
  • If an employee is posted to Germany for more than twelve months, all working conditions regulated by German laws, regulations, administrative provisions and generally binding collective bargaining agreements apply to employers domiciled abroad, but for working conditions that affect the creation or termination of the employment relationship or the company pension scheme. Under certain conditions, the period from which the aforementioned legal consequences arise can be extended from 12 to 18 months.
  • In cases of employee leasing with cross-border implications, certain information obligations are imposed on the hirer towards the lender, so that the lender is able to comply with the applicable working conditions in the business of the lender in Germany.
  • There are certain exceptions for short terms visits, e.g. for employees carrying out initial assembly or installation work which are part of a supply contract, if it does not take more than 8 days within one year; furthermore for employees who – without providing work or services for their employer to third parties in Germany, conduct meetings or negotiations, participate as visitors in a trade fair event or conferences, or visit Germany for the purpose of training in the German part of the international group or company employing them – these exemptions only applying if the visit(s) does not take more than 14 days in a row and not more than 30 days within a year.


US Citizenship & Immigration Services (USCIS), the agency within Homeland Security responsible for adjudicating applications and petitions seeking immigration and naturalization benefits, announced on Tuesday, August 25, 2020, that it will not engage in en masse staffing furloughs before the close of the fiscal year on September 30, 2020. As previously reported on Mayer Brown’s Mobile Workforce blog, the agency had planned to furlough 13,000 USCIS staff, equal to 70% of its workforce, by August 31.  While furloughs are off the table through at least September 30, the agency has signaled that users can expect significant delays, as the agency has had to engage in “aggressive spending measures” to offset the budgetary pressures that initially led it to identify a need for across-the-board furloughs.

Our full coverage may be found on Mayer Brown’s COVID 19 blog.


On Friday, August 14, 2020, US Citizenship & Immigration Services completed a second round of lottery selection for FY 2021 H-1B cap-subject petitions. The new selection round was due to the fact that the number of timely filings for H-1B petitions corresponding to  registrations selected under the first round were insufficient to fill the annual quota of 85,000, which includes 65,000 H-1B petitions, and an additional 20,000 petitions allotted to beneficiaries who possess a US advanced degree.  Employers whose H-1B petitions were selected in the first round of the lottery had between April 1 and June 30, 2020, to file petitions.  As a result of the shortage in filings submitted by June 30, USCIS is allocating the unused numbers randomly among the non-selected cases under the first round. Continue Reading USCIS Issues Second Round H-1B Cap Lottery Selection With A November 16, 2020 Deadline to File

On August 3, 2020, President Trump issued an Executive Order (“EO” or the “Order”) directing the heads of all agencies that enter into contracts to review the impact of contractors and their subcontractors employing H-1B visa holders on the wages and employment opportunities of US workers. Specifically, the EO directs all federal agencies to review whether US workers were negatively impacted or national security risks were created by the contracting and offshoring practices of federal agencies. The EO further directs the Secretaries of Labor and Homeland Security take action to prevent any adverse effects produced by the employment of H-1B visa holders on the wages and working conditions of US workers.

The theme is not a new one. On April 18, 2017, the President issued an EO announcing the policy of the executive branch as “Buy American Hire American” (“BAHA”). For a full description, visit our client alert concerning the BAHA order. The BAHA EO was an early signal of the new administration’s focus on limiting the admission of foreign workers, both temporary and permanent:

In order to create higher wages and employment rates for workers in the United States, and to protect their economic interests, it shall be the policy of the executive branch to rigorously enforce and administer the laws governing entry into the United States of workers from abroad, including section 212(a)(5) of the Immigration and Nationality Act (8 U.S.C. 1182(a)(5)) [the ground of inadmissibility for intending workers who lack labor certification].

The new EO follows closely on the heels of the recent Presidential Proclamation that bars the entry of non-immigrant workers in several categories, including H-1Bs.

A “Fact Sheet” released by the White House in conjunction with the latest EO, describes the Administration’s position that the H-1B visa category is being “misused” and “cost[ing] millions of Americans their jobs.” Having already reached that conclusion, the President’s call for a mere review of the impact of H-1B visa holders on the wages and availability of public sector jobs for US workers almost seems half-hearted.

  1. What Are The Actions Directed By The EO?

The EO directs the heads of all executive departments and agencies to review the performance of contracts in fiscal years 2018 and 2019, with a particular focus on the following aspects.

i.   Whether contractors or subcontractors used temporary foreign labor in the United States, and if so:

      • The nature of the services performed by temporary foreign labor;
      • Whether opportunities for US workers were impacted by the hiring of temporary foreign labor; and
      • Whether the hiring led to any effects on national security.

ii.   Whether contractors or subcontractors are performing work in foreign countries that was previously performed in the United States, and if so:

      • Whether opportunities for US workers were impacted by the offshoring practice;
      • Whether affected US workers were eligible for assistance under the Trade Adjustment Assistance program; and
      • Whether the offshoring led to any effects on national security.

iii.   Whether either the hiring or offshoring practices listed above negatively impacted the economy and efficiency of Federal procurement or national security.

iv.   Whether the executive department or agency remains compliant with citizenship requirements for federal workers and the salary appropriations for federal workers under the Consolidated Appropriations Act.

After the assessment, executive department and agency heads are to submit a report that summarizes findings and recommends corrective actions, if necessary.

In addition to the review and reporting requirements, the EO requests the Secretaries of Labor and Homeland Security take action to prevent any potential impacts on US workers caused by the employment of H-1B visa holders, including to ensure that the employers of these visa holders are in compliance with the H-1B employer attestation requirements of section 212(n) of the Immigration and Nationality Act (“INA”).

2.  What Should Employers Know About This EO?

Contractors and subcontractors should prepare for additional reporting requirements that may originate from the agency reviews directed by the EO. These new requirements may impose additional time and resource expenditures on federal contractors that would need to produce extensive reports on its workforce hiring and offshore practices.

The EO may also serve as a jumping-off point to revise the federal acquisition regulations to flat out ban the usage of H-1B workers and offshoring practices for government contractors and subcontractors. If this becomes reality, contractors with H-1B workers and offshore services should anticipate significant difficulties in procuring federal contracts. That approach is more likely than the Trump Administration imposing additional hurdles on federal contractors who may wish to sponsor foreign nationals for H-1B status, as the Trump Administration has routinely taken the most straightforward approach to enforce new restrictions on temporary labor.

Although private sector employers of H-1B visa holders (including government contractors and subcontractors whose workforces will be the subjects of the EO’s required reviews) are not directly impacted by the EO, the reviews and recommendations of the executive branch agencies could lead to further restrictions on the availability of needed talent for US employers in general.

The EO likely portends additional scrutiny of the H-1B visa category more broadly. The language used in the Order suggests that the Administration may be signalling prospective changes to the rules and regulations pertaining to employer-employee relationships for H-1B employers and additional measures to prevent H-1B visa holders from working at third-party job sites. This is particularly relevant to large employers of technology professionals that travel to client sites for installation, development, and maintenance, a major sector within the temporary foreign labor population in the United States.

Finally, the Order’s reference to section 212(n) may be a nod to future Immigration and Customs Enforcement inspections of H-1B employers. This section of the INA requires employers of H-1B workers to make certain attestations, including, for example, that the available H-1B position does not undercut American wages. As such, employers of H-1B workers should consider reviewing their H-1B compliance file sooner rather than later.

USCIS announced last week the implementation of adjustments that will slow the processing of Premium Processing Service cases, as well as increase filing fees for the majority of requests as part of a published Final Rule.

As covered in our previous blog post, a proposed Final Rule was reopened in January and the comment period extended to February 10.  On May 27, 2020, the USCIS Fee Rule went to the Office of Management and Budget’s Office of Information & Regulatory Affairs (OIRA).  OIRA completed its review on July 22, 2020, and the Final Rule was published on July 31, 2020.

In addition to lengthening processing for the Premium Processing Service and adjusting fees for petitions filed with USCIS, the Final Rule removes certain fee exemptions, changes fee waiver requirements, modifies intercountry adoption processing, and makes certain adjustments to filing requirements for nonimmigrant workers.

The Final Rule, including the adjusted fee amounts, is effective October 2, 2020.  Any application, petition, or request postmarked on or after that date must include the new fees under the Final Rule.

Adjustment to Premium Processing Timelines

As part of the Final Rule, USCIS has adjusted the processing time for its Premium Processing Service, which provides accelerated processing of some visa submissions for an additional filing fee ($1,440).  The Final Rule will increase the processing time from fifteen (15) calendar days to fifteen (15) business days.  This change will increase processing times associated with the Premium Processing Service, which will provide less flexibility to employers and lengthen the time required to secure approvals of work authorization.

Changes to Filing Fees for Nonimmigrant and Immigrant Petitions

The Final Rule adjusts the USCIS fee schedule to “provide for recovery of the estimated full cost of immigration adjudication and naturalization services,” according to the language in the published Final Rule.  DHS is adjusting USCIS fees by a weighted average increase of 20 percent, adding new fees for certain immigration benefit requests, establishing multiple fees for nonimmigrant worker petitions, and limiting the number of beneficiaries for certain forms.

Of particular note, USCIS has implemented varying filing fees for Form I-129, petitions with USCIS for H, L, O, E, and TN visas.  Under the Final Rule, each non-immigrant category will be subject to a separate fee rather than the current fee of $460.

Continue Reading USCIS Lengthens Premium Processing Timeline and Implements Fee Increases, Among Other Adjustments

USCIS Furloughs Postponed and Possibly Avoided

In June 2020, US Citizenship and Immigration Services (USCIS) served notice on The American Federation of Government Employees (AFGE), the union representing the agency’s 13,400 fee-based employees, that absent approval by Congress of $1.2 billion requested as part of the pending stimulus bill to make up for a precipitous drop in filings due to the COVID-19 pandemic, the agency would commence administrative furloughs as early as August 3, 2020, which, as reported in our July 9 post, was predicted to augment already significant delays in USCIS processing.  On Friday, July 24, 2020, the USCIS announced a one-month delay in the planned furloughs. The furloughs are now planned for August 31.

USCIS is funded primarily by fees collected for processing visas and citizenship applications, and the agency originally planned to furlough employees August 3 due to a projected loss of that revenue during COVID-19.   “Recent assurances from Congress, and an uptick in application and petition receipts, have allowed USCIS senior leadership the flexibility to responsibly delay the start date of the administrative furlough of approximately 13,400 USCIS employees until Aug. 30,” agency spokeswoman Jessica Collins said.

Fee Increase Approved by OMB

The fiscal situation for the benefit agency is likely to be helped as well by an expected increase in the fees USCIS collects for the petitions and applications it processes.   On November 14, 2019, the USCIS published in the Federal Register a proposal to adjust application fees to ensure all of its operational costs are covered. “USCIS is required to examine incoming and outgoing expenditures, just like a business, and make adjustments based on that analysis. This proposed adjustment in fees would ensure more applicants cover the true cost of their applications and minimize subsidies from an already over-extended system,” said Ken Cuccinelli, director of USCIS. In January of this year the proposal was reopened and the comment period extended to February 10, 2020. On May 27, 2020, the USCIS Fee Rule went to the Office of Management and Budget’s Office of Information & Regulatory Affairs (OIRA).  OIRA completed its review on July 22, 2020, and a final rule, to be effective 60 days thereafter, is expected to be published soon.

On July 14, 2020, President Trump issued an Executive Order that has redefined the country’s relationship with Hong Kong. The Executive Order appears to be in retaliation to the Chinese government’s legislative actions in May that imposed national security measures on Hong Kong. Specifically, the President denounced the actions of the People’s Republic of China (PRC or China) as “arbitrary” and PRC’s “latest salvo in a series of actions . . . [to deny] autonomy and freedoms . . . to the people of Hong Kong.” Under authority set forth in the United States-Hong Kong Policy Act of 1992, the Executive Order ostensibly rescinds the United States’ historical policy of treating Hong Kong as a separate entity from the PRC, forging broad reaching consequences on diplomatic relations, international trade, and immigration.

1.  How Will The Executive Order Affect US-Hong Kong Immigration?

The Executive Order removes Hong Kong’s preferential treatment as a separate customs territory.  The impacts of this new policy under the Trump Administration include the following:

i.  The United States will now apply the same rules of chargeability against Hong Kong Chinese Special Administrative Region (SAR) nationals as it does to China-Mainland Born nationals;

ii.  Hong Kong is removed from its participation in the Diversity Visa Program;

iii.  Hong Kong is removed from the Visa Waiver Program as it applies to Guam and the Commonwealth of the Northern Mariana Islands (CNMI); and

iv.  Hong Kong nationals will be held to China’s visa reciprocity schedule.

These provisions of the Executive Order have significant impacts on certain Hong Kong Chinese SAR nationals and their ability to immigrate to the United States.  In addition to no longer being eligible for certain visa waivers or diversity visas, Hong Kong Chinese SAR  will now be subject to the significant backlogs of available immigrant visas in the “China-Mainland Born” preference categories.  These backlogs are often several years longer than those of the “All Chargeability Areas” category, under which Hong Kong previously fell.  Additionally, Hong Kong Chinese SAR  will be subject to the entrance and time period limitations of the China nonimmigrant visa reciprocity schedule.  This means, for example, that a prospective H-1B worker from Hong Kong, who would have previously been eligible for a five-year visa, will now only be eligible for a one-year visa.

The Executive Order also terminates the Fulbright exchange program for future exchanges by participants traveling both from and to China or Hong Kong. The Fulbright Program is a global educational and cultural exchange program for students, scholars, artists, teachers, and professionals seeking to study, teach, or pursue research and professional projects around the world. The program was signed into law by President Truman in 1946, and is currently operated in partnership with more than 160 countries worldwide.

2.   What Should Employers Be Thinking About?

These changes will now need to play into the calculus for US employers who currently or will prospectively employ Hong Kong Chinese SAR in the United States. The new policy will significantly impacts the speed at which employers are able to secure long-term immigration statuses for their Hong Kong-born employees and the frequency with which the nonimmigrant statuses of these employees need to be reviewed. Employers should identify the population of Hong Kong Chinese SAR working in the United States, the visa statuses under which those employees were admitted, and the impacts to the ongoing validity of those statuses causes by the shift in chargeability and reciprocity.

Although the Trump Administration’s termination of the Fulbright Program does not largely affect employers, the decision to end this long-standing exchanging program is another signal of chilling relations between the United States and China and US immigration policy at large. Individuals with any vested interest in immigration to the United States must remain apprised of the constant, ongoing swings policy that we have seen over the last several months.

The State Department’s most recent guidance on the Executive Order stated that Hong Kong will continue to be considered a separate customs territory as long as the Hong Kong-US treaty remains in effect. Further information regarding implementation has not yet been announced; however, the order gives US immigration agencies just fifteen days to take all appropriate actions necessary to execute the new policy. Please continue to follow our blog for updates and ongoing changes in US immigration.