Telecommuting technologies have enabled widespread remote work, but it has also blurred the line between work and personal life. Constant connectivity has fostered an “always-on” culture, raising concerns that employees are increasingly vulnerable to overwork, burnout, and declining mental health. In response, many countries and other jurisdictions including France, Australia, Spain, and Ontario, Canada, have adopted right-to-disconnect (RTD) laws that give employees the legal right to disengage from work-related communications, such as emails or calls, outside of contracted hours. These policies, however, remain controversial. Critics argue that limiting off-hours communication may reduce firm efficiency, especially in industries that rely on quick responses and round-the-clock availability. Others question whether such laws are even practical to enforce. In a new paper, we bring new evidence to this debate.

Drawing on a broad sample of firms in the Organization for Economic Co-operation and Development (OECD) countries, we examine how RTD laws affect both companies and employees. The results are clear: Rather than harming performance, RTD laws are associated with higher firm profitability, likely driven by improvements in employee productivity. At the same time, employees report greater satisfaction with their work-life balance. Taken together, these findings suggest that protecting employees’ right to disconnect can align with firm success.

Firms’ Financial Performance Strengthens

We examine how RTD laws affect firm performance using a sample of publicly traded OECD firms between 2014 and 2024. After excluding countries with fewer than 50 firms each year over the sample period, our final dataset covers 28 OECD member countries, 11 of which adopted RTD laws before 2024. Following Callaway and Sant’Anna (2021), we apply a staggered difference-in-differences design that exploits cross-country variation in the timing of RTD law adoptions to estimate their causal effects on firm outcomes. Our analyses provide strong evidence that firm profitability rises after RTD laws take effect. Using a sample of 136,429 observations, we observe that both ROA and EBITDA increase by 0.8 percent, which equals 5.7 percent and 6.1 percent  of their corresponding standard deviations. These results remain robust after controlling for firm characteristics, firm and year fixed effects, and a wide range of robustness checks, including specifications that restrict the control group to neighboring countries.

We further explore heterogeneity in the profitability effects by leveraging variation in the design and enforcement of RTD laws. While some countries impose fines on employers for non-compliance or mandate the inclusion of RTD clauses in employment contracts, others do not. We find that profitability gains are larger when laws include explicit fines and contractual obligations. Moreover, the positive effects are amplified in tighter labor markets that favor employees and enhance their bargaining power.

Employee Productivity Rises

Supporters of RTD laws argue that employee productivity is likely to improve because employees are less prone to burnout and can focus more effectively during regular working hours. In addition, when workers have more free time, they may engage in non-work-related activities that increase their spending and consumption, potentially benefiting the broader economy. To investigate the mechanisms behind the observed profitability gains, we examine the effect of RTD laws on two productivity measures: revenue per employee and operating expenses per employee. We find that revenue per employee rises significantly, by $35 on average. And operating expenses per employee decline, by $21 on average following the adoption of RTD laws, both consistent with enhanced employee productivity.

We also test whether profitability improvements are driven by greater employee spending outside of work. If this were the case, we would expect stronger effects in retail and hospitality firms, which are more directly affected by consumer demand. However, the magnitudes of profitability gains are similar across retail, hospitality, and other industries. This evidence suggests that the profitability increase in our sample is not primarily attributable to higher off-work consumer spending.

Employee Satisfaction Improved

Finally, we examine the effect of RTD laws on employees, focusing on work-life balance as a key measure of well-being. In December 2021, Ontario amended its Employment Standards Act to grant employees in firms with at least 25 workers the right not to respond to work messages after hours and making it the only Canadian province to adopt the RTD law. Using employee reviews from Glassdoor, we implement a difference-in-differences design to analyze how ratings of work-life balance changed following the law’s adoption. This setting provides a relatively homogeneous labor environment compared with cross-country analyses. We find that Ontario employees report significantly higher satisfaction with their work-life balance after the RTD law took effect, with the improvement particularly pronounced among employers that had lower work-life balance ratings before the law’s adoption. These results remain robust after controlling for employer, province, and month fixed effects.

Net Consequences

Our findings provide empirical evidence to inform the debate on the benefits and drawbacks of RTD laws. We show that RTD adoption strengthens firm performance. At the same time, employees report higher satisfaction with their employers and better work-life balance. These results suggest that RTD laws deliver dual benefits: supporting employees’ mental health and well-being while enhancing firms’ productivity and operational efficiency.

Implications

Several governments, including in the United States, are considering RTD legislation. For instance, proposals have been introduced in New York City, New Jersey, and California, although they have faced resistance. By offering the first large-scale empirical evidence on the consequences of RTD laws for both employers and employees as the two primary stakeholders, our study directly addresses concerns that such laws may harm firm operations. Our results do not support these concerns. Beyond governments, companies in countries without formal RTD laws, such as Volkswagen and Daimler in Germany, have voluntarily implemented similar policies. Our evidence also speaks to these corporate decision makers and shareholders, providing insights into the likely outcomes of adopting RTD practices.

This post comes to us from Yuye Ding, Mark (Shuai) Ma, and Zhuoying Niu at the University of Pittsburgh’s Katz Graduate School of Business. It is based on their recent article, “Working from Home After Hours? Right to Disconnect Laws, Firm Profitability and Employee Work-Life Balance,” available here.