[itronitron]

asking for a friend... what if you hire someone 'Alex', a resident of Washington State and then they move to Germany because their spouse is relocated for employment to Germany, where they both receive benefits but are required to remain US Citizens (and return to the US each year)... in that case are you paying Alex as if they are a Washington State resident or are you legally required to pay them as if they are a German resident?

[mitchellh]

Disclaimer: Not a lawyer, consult a real lawyer.

I don't know for the specific case you've posed, but we've had similar things happen. If an employee moves into a state/country we can't employ them in, it causes a bit of a panic. We either have to 1.) establish the correct legal/financial entities to employ them or 2.) let them go. In theory, you can convert the employee into a contractor, but this has ramifications on options vesting and benefits and so on and is a huge mess. I'm sure there are a lot more caveats to this that are under consideration (again, I'm now a lawyer) that may affect this, so I wouldn't generalize this too far.

I don't think we've ever let someone go for this though, we have once to memory panicked and rushed to establish the entity (potentially paying fines along the way). I may be mistaken, I just don't recall exactly. In any case, we kindly ask our employees to notify us of any change of location, since it almost certainly changes payroll tax even if you are moving to a location we CAN employ in (i.e. even between US states). Also, the panicking is not fun for anyone (including the employee, whose job status is suddenly uncertain).

[germanier]

As soon as you start working on German soil, German employment laws apply fully. Citizenship, prior residence, etc. are almost completely irrelevant. There is a social security agreement between the US and Germany which might exempt the person from German pension contributions but nothing more.

(If the spouse is working for the US military there are NATO agreements which might make German employment law inapplicable but I know almost nothing about that.)

[myrle]

Make sure and include a "Gerichtsstand" in the employment contract. This is basically the name of the city in Germany where legal processes related to the contract will be conducted. This will save you a good deal of unpleasantness later, should any employment issue come before a court of law in Germany.