Leaping Regulatory Hurdles in the U.S. and Abroad

I enjoyed your column on teleworking, having been working on international IT teams since 2005. Recently my sole proprietorship was up for a U.S. subcontract, but there were many documents requested and insurance requirements I couldn't afford. Why is there not a set of standard documents, regulations, contracts, and insurance companies that serve the entire world? —D.A., São Paulo

Your question highlights an interesting dilemma: While technology has increasingly opened international business opportunities and a global workforce to business owners, national regulatory requirements fraught with inefficiencies often throw up stumbling blocks.

In the U.S., both federal and state workplace regulations present "a difficult challenge" for entrepreneurs who want to take advantage of the global marketplace, says Brett Caine, president of Citrix Online. Based in Santa Barbara, Calif., the software maker behind GoToMeeting and GoToMyPC has close to 400 international employees, many of whom work from home offices.

While Citrix and its business clients are learning how to collaborate across geography, "U.S. and global corporations will need to resolve [regulatory and compliance] issues in the face of emerging markets and competitiveness of countries such as India, China, and others," Caine says.

Larry Harding, president and founder of international business services provider High Street Partners in Annapolis, Md., agrees. "The part that's been solved is setting up the technology, processes, and systems [to do global business]. But the stuff that should be easy is unbelievably challenging—the back office compliance and regulatory issues," Harding says.

Nationalistic and protectionist legislation developed in the U.S. and around the world over the centuries does not accommodate today's borderless business reality. "Laws have been developed with domestic job protection in mind, so we have not caught up with what technology allows, such as enabling someone in Brazil to do a job," Harding says. "In almost all jurisdictions, laws make it harder to hire someone from outside the country."

Incentives to Work "Under the Radar"

There is some movement to establish the kind of interjurisdictional documents and requirements that you propose, but "for every law that gets changed to make it more favorable, another comes up that makes it harder" to hire an international employee or subcontractor, Harding says. "To a huge degree, many of these regulations are trying to legislate against the tide," he says. "It is so easy for companies to use telecommuters under the table or under the radar. What's harder is for you in Brazil to do things the right way and stay in compliance. The more difficult they make it for you, the more incentive you and others have to do things under the radar."

In order to stay in legal compliance, many large corporations establish business entities in countries where they plan to hire, a solution that can be prohibitively costly for smaller companies. Another fix is to use one of the U.S.-based employment agencies, such as Kelly Services (KELYA) and Manpower (MAN), which have expanded in recent years to work with international employees and subcontractors.

For instance, HR Plus in Chicago works with small and large U.S. companies, conducting criminal background checks and credit checks and verifying past employment and education claims made by international contractors and freelancers, says Jon Cano, the company's vice-president for operations.

Seek Standard Consultant Portals

In the future, look for contracting opportunities that employ such standard consultant portals, advises Nate Gilmore, vice-president of marketing and business development at Shipwire, an e-commerce order-fulfillment service based in Palo Alto, Calif. "Overall, if somebody wants to hire you, they will help you get over the hurdles," he says. "Often, you just need to know which approved service to sign up for and it will make it easy for them to hire you. You may pay a portion of the fee to go through that company, but you won't have the costs."

Outsourcing subcontracts can include boilerplate requirements that seem might insurmountable to overseas contractors but may not apply to every job. "Ask if they are relevant to your part of the subcontract and how overseas companies have cost-effectively satisfied these requirements in the past. They may accept your insurance and standard practices if you explain things to them or can demonstrate a known insurer like Lloyds of London," Gilmore says.

While globalization facilitates the free flow of capital, talent, and innovation, other factors will continue pushing in the opposite direction, says international trade consultant Ayse Oge, president of Ultimate Trade in Encino, Calif. "U.S. immigration law enforced strict regulations after 9/11, due to rampant global terror in the world. I don't foresee any relaxation of those laws and regulations in the near future," she says.

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