How to Create Remote Employment Contracts Compliant with Global Laws in 2026

Your startup just hired its first remote employee in another state. You googled "employment contract template," downloaded something, filled in the blanks, and sent it over. Three months later, that employee quits and files a wage claim. You discover your contract violated state labor laws you didn't know existed. The template you used was written for California. Your employee is in Texas. The laws are completely different.

Or worse: you hire someone in Portugal using your US employment contract. They later claim they're entitled to Portuguese employment protections because you didn't structure the relationship correctly. You thought you were hiring an employee. Portuguese law thinks you created an employer relationship subject to their regulations. Now you're dealing with international employment law you never intended to navigate.

Remote work makes geography irrelevant for productivity. It doesn't make it irrelevant for legal compliance. Every state has different employment laws. Every country has different rules. This guide shows you how to create remote employment contracts that protect your company while staying compliant.

Why Remote Contracts Are Different

You can't just use your office-based employment contract for remote workers. Different issues arise.

Multi-state compliance is complex. If your office is in New York but your employee works from home in California, which state's laws apply? Often it's the employee's state. California has strict requirements that don't exist in New York. Your contract needs to account for this.

Work location flexibility creates risk. Can your employee work from anywhere? Travel while working? Move to another state without telling you? If they move from a state with no income tax to one that does, you have new tax obligations. Your contract should define location requirements.

Equipment and workspace aren't provided. Who pays for home office equipment? Internet? Phone? What if equipment breaks? Different states have different reimbursement requirements. California requires employers to reimburse all necessary business expenses. Other states don't. Your contract needs to address this.

Monitoring and privacy issues. Can you require employees to have cameras on in meetings? Use time-tracking software? Some states restrict employee monitoring. Your contract needs to set clear expectations within legal bounds.

Hours and availability are harder to define. When is the employee "at work"? If they're checking Slack at 9pm, is that work time? If they take a 2-hour lunch to run errands and work later, is that allowed? Remote contracts need clearer definitions of working hours and availability.

Key Legal Distinctions

Before writing anything, understand the legal foundation.

Employee vs. Independent Contractor

This is critical. Misclassifying an employee as a contractor creates massive liability.

Employee: You control when, where, and how they work. You provide equipment. You withhold taxes. They get benefits. Relationship is ongoing.

Independent Contractor: They control how they work. They use their own equipment. They're responsible for their own taxes. No benefits. Typically project-based or fixed-term.

The IRS and states have tests to determine classification. If you're unsure, consult employment counsel. Getting this wrong is expensive (back taxes, penalties, benefits owed).

This guide focuses on employee contracts. Contractor agreements are different animals.

At-Will vs. Fixed-Term Employment

At-will (default in most US states): Either party can terminate at any time, for any legal reason or no reason, with or without notice. Most employment in the US is at-will.

Fixed-term: Employment for specified period (1 year, 2 years). Can only terminate early for cause or specified reasons. More common internationally.

Your contract should state which applies. At-will gives you flexibility. Fixed-term gives employee security but restricts your ability to make changes.

Essential Contract Elements

What must be in every remote employment contract?

Basic Information

- Legal name of company (employer)
- Legal name of employee
- Job title and brief description of role
- Start date
- Employment status (full-time, part-time, at-will, fixed-term)
- Work location (employee's state/country, whether location can change)

Compensation

- Base salary (annual or hourly rate)
- Pay frequency (bi-weekly, monthly)
- Overtime eligibility (exempt vs. non-exempt under FLSA)
- How salary is paid (direct deposit to US account, international wire, etc.)
- Bonus/commission structure (if applicable)
- When and how compensation will be reviewed

Be specific. "Competitive salary" isn't a term. "$85,000 USD per year, paid bi-weekly via direct deposit" is.

Working Hours and Schedule

For remote workers, this needs more detail than office contracts.

- Expected hours per week (40 hours full-time)
- Core hours (if required to be available during certain times)
- Flexibility (can they set their own schedule within reason?)
- Overtime requirements and approval process
- On-call or after-hours expectations
- Time zone considerations (if working across zones)

Example: "Employee's standard work schedule is 40 hours per week, Monday-Friday. Employee must be available for core hours of 10am-3pm Pacific Time for team meetings and collaboration. Outside core hours, Employee may set their schedule with manager approval. Any work over 40 hours per week requires advance manager approval."

Work Location and Equipment

Primary work location: "Employee will work remotely from their residence in [State/Country]. Any change in work location must be approved in writing at least 30 days in advance. International relocation requires separate agreement."

This prevents someone from moving to a different state or country without notice, which creates compliance and tax issues for you.

Equipment provided: List what company provides (laptop, monitor, software licenses) and what employee provides (internet, workspace, furniture).

Reimbursements: "Company will reimburse Employee for necessary business expenses in accordance with company policy and state law requirements. Expenses over $[amount] require advance approval."

California, Illinois, and some other states require reimbursement of all necessary business expenses. Even if your state doesn't, being clear prevents disputes.

Benefits

List all benefits clearly:

- Health insurance (what's covered, employee contribution, when eligible)
- Retirement plans (401k, match amount, vesting schedule)
- Paid time off (vacation, sick leave, how it accrues)
- Holidays (which ones, or flexible/unlimited PTO)
- Parental leave
- Other benefits (professional development stipend, co-working space allowance, etc.)

Reference your benefits handbook or policy documents for full details. The contract should list what's available, with specifics in separate documents.

Confidentiality and IP Assignment

Critical for protecting your company.

Confidentiality: Employee agrees not to disclose confidential company information during or after employment. Define what's confidential (code, customer data, business plans, etc.).

IP Assignment: Any work product, inventions, or IP created during employment related to company business belongs to the company, not the employee.

Standard clause: "Employee agrees that all work product created within the scope of employment shall be considered 'work made for hire' and shall be the sole property of Employer. Employee assigns all rights, title, and interest in any inventions or IP created during employment that relate to Employer's business."

Some states (California, for example) restrict how broad IP assignment can be. Include carve-outs for work done on own time with own resources unrelated to company business.

Non-Compete and Non-Solicit (Where Enforceable)

Non-compete: Prevents employee from working for competitors for specified time after leaving. Many states restrict or ban these. California, North Dakota, Oklahoma generally don't enforce them. Other states allow but with limits (reasonable duration, geography, scope).

Non-solicit: Prevents employee from soliciting your customers or employees after leaving. More enforceable than non-competes, but still has limits.

Before including these, check if they're enforceable in the employee's state. If you include one that's not enforceable, the rest of your contract may be questioned.

General rule: If your business has legitimate trade secrets or customer relationships to protect, consult lawyer about reasonable non-compete/non-solicit. If you're just trying to prevent employees from leaving, these won't help and may create bad faith.

Termination

Be clear about how employment can end.

At-will statement: "This employment is at-will. Either party may terminate at any time, with or without cause or notice, subject to applicable law."

Notice period: While at-will doesn't require notice, you can request it ("Employee agrees to provide at least 2 weeks' notice of resignation"). You typically should provide severance if you want notice from yourself.

What happens to equipment: "Upon termination, Employee must return all company equipment within 5 business days."

Final pay: "Final paycheck will be issued in accordance with state law." (Some states require immediate payment, others allow until next regular payday.)

Post-termination obligations: Confidentiality continues, IP remains company property, any non-compete/non-solicit survives termination.

Dispute Resolution

How will disputes be resolved?

Governing law: "This agreement shall be governed by the laws of [State/Country]." Usually the employer's state, but some states require disputes involving their residents be governed by their law.

Arbitration clause (optional): "Any disputes shall be resolved through binding arbitration rather than court." This can reduce legal costs but limits employee rights. Some states restrict mandatory arbitration.

Venue: Where lawsuits would be filed if they occur. "Any legal action shall be brought in courts located in [County], [State]."

State-Specific Requirements

Some states have special rules you must include.

California:
- Must reimburse all necessary business expenses
- Can't prohibit discussion of wages
- Non-competes generally unenforceable
- Specific notice requirements for arbitration
- Must provide Labor Commissioner notice

New York:
- Wage theft prevention notice required
- Specific pay frequency rules
- Restrictions on wage deductions

Illinois:
- Must reimburse business expenses
- Specific wage payment timing
- Restrictions on non-competes

Before finalizing, check specific requirements for your employee's state. Department of Labor websites usually list requirements.

International Remote Employees

Hiring someone in another country is complex. Quick summary:

You likely can't just use a US employment contract. Most countries have employment laws that supersede your contract. If you hire someone as an employee in Germany, German employment law applies even if your contract says US law.

Options for international:
1. Use Employer of Record (EOR) service like Deel or Remote.com. They employ the person locally and contract them to you.
2. Set up local entity in that country (expensive, only makes sense at scale).
3. Hire as contractor, not employee (but they must truly be contractor under local law).

Tax implications: You may create "permanent establishment" in that country, triggering tax obligations. Consult international tax attorney.

Data privacy: GDPR (Europe) and other data laws affect how you can monitor employees and handle their data.

International employment is beyond DIY. Use EOR services or consult international employment counsel.

What NOT to Include

Some things seem reasonable but create problems.

Unlimited PTO without clear policy: Sounds generous but creates accounting issues and ambiguity. If you offer unlimited PTO, have clear approval process and expectations documented separately.

Overly broad non-competes: "Can't work in any related industry for 5 years within 500 miles" won't be enforced and makes you look unreasonable.

Arbitrary rules: "Must use webcam at all times during work hours" may violate privacy expectations or be unenforceable depending on state.

Contradictory terms: Saying it's at-will but also listing required causes for termination. Pick one.

Promises you can't keep: "Guaranteed annual raises" or "job for life" create obligations you may not want.

Amendments and Changes

Employment terms change. Handle it properly.

Include in contract: "Employer may modify terms with written notice. Continued employment after notice constitutes acceptance."

Better: "Material changes to compensation, role, or location require written agreement by both parties. Other terms may be modified with 30 days' written notice."

When making changes:
1. Provide written notice (email is fine but keep records)
2. Give reasonable advance notice
3. Have employee acknowledge receipt
4. Document everything

Major changes (big pay cut, role change, location change) may be considered constructive termination in some states. Consult lawyer for big changes.

Getting Signatures

Electronic signatures are legally binding (under ESIGN Act and state UETA laws).

Use DocuSign, HelloSign, or similar. Keep signed copies. Both parties should have fully executed copy.

Have employee sign before start date. Don't let someone start work without signed contract. If something goes wrong, you'll wish you had it.

Related Documents You Need

Employment contract isn't enough. Also have:

Offer letter: Comes before contract. States offer terms, compensation, start date. Less detailed than contract. Employee signs to accept, then contract follows.

Employee handbook: Detailed policies (PTO, code of conduct, remote work expectations). Contract references handbook for specifics.

Confidentiality/NDA: Can be in contract or separate. If handling very sensitive info, separate NDA with more detail.

Invention assignment agreement: Sometimes separate from contract, especially in tech companies. Clearly assigns IP.

Stock option or equity agreements: If offering equity, separate agreement with vesting terms, exercise windows, etc.

When to Use a Lawyer

DIY is risky for employment contracts. Consider lawyer for:

- First time hiring in a new state
- Any international hires
- Executive hires (complex comp, equity, severance)
- If you have significant IP or trade secrets
- If including non-compete or complex terms
- If employee asks for custom terms

Cost: $500-2,000 for lawyer to draft or review contract. Cheaper than lawsuit for getting it wrong.

Many law firms offer flat-fee employment contract review. Upload your draft, they review and fix issues. Worthwhile investment.

Keeping Contracts Updated

Employment law changes. Your contracts should too.

Annual review: Have lawyer review your standard contract annually. Laws change, especially around remote work (still evolving area).

When laws change: Major employment law changes may require updating existing employee contracts (or at minimum, their handbooks).

When you expand: Hiring in a new state? Have contract reviewed for that state's requirements.

Outdated contracts create risk. Keep them current.

Red Flags in Candidate Negotiations

Sometimes candidates ask for contract changes. Some are fine, some are red flags.

Fine to negotiate:
- Start date
- Salary within your range
- Title (within reason)
- Specific benefits questions
- Asking for clarity on vague terms

Red flags:
- Refusing to sign IP assignment (for role where they'll create IP)
- Wanting to remove confidentiality completely
- Asking for guaranteed employment period when you offer at-will
- Requesting terms that violate laws
- Asking to be exempt from policies that apply to everyone

Flexibility is good. But someone who fights basic protective clauses may be trouble.

Common Mistakes

Using templates without customization: Generic internet templates don't account for your state, your situation, or current law. Dangerous.

Verbal agreements: "We agreed they'd get a raise in 6 months." If not in writing, it's hard to enforce (either direction).

Not updating for location changes: Employee moves from Texas to California. Your contract still references Texas law. Now you're potentially non-compliant with California requirements.

Copying employee contract to contractor: Employees and contractors have different legal relationships. Don't use same contract.

Making promises you're not sure about: "You'll definitely get promoted in a year." Now you may be contractually obligated.

Not keeping signed copies: If dispute arises and you can't find signed contract, you're in weak position.

The Bottom Line

Remote employment contracts protect both you and your employees by setting clear expectations and ensuring legal compliance. They're not scary legal documents meant to intimidate. They're agreements that make working relationships clear and fair.

Get them right upfront and you prevent problems. Get them wrong and you're fixing expensive mistakes. The small investment in proper contracts pays off in reduced risk, better relationships, and legal protection when you need it.