[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).