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In March 2020, state and local governments across the United
States began to issue shelter in place orders to slow the spread of
COVID-19, often mandating that companies allow work to be performed
remotely to the greatest extent possible. Even as restrictions were
eased over the summer months, officials continued to recommend or
require remote work arrangements. As cases surge again, some
employers have already announced plans to permit remote work to
continue well into 2021 and even beyond.
Of course, remote work is not new, and many of its challenges
such as providing remote work tools, maintaining productivity,
staying connected with coworkers, and managing effectively from a
distance are well known to employers. (Some of the top challenges
facing employers in the shift to remote work are explained here.)
Remote work spurred by COVID-19 has introduced new wrinkles.
First, because the switch to remote work was driven by government
mandates and public health concerns, employers permitted remote
work for roles that had not been granted such flexibility in the
past. Those same public health concerns frequently prompted people
not to work from their primary “home” residences, but
to relocate to other areas to be with family or friends, or where
the perceived risk of infection was lower, or just somewhere more
comfortable. As the pandemic has continued, some workers have
remained at these secondary locations, or made plans for where they
might want to reside now that it seems a strong internet connection
is more important than a regular office presence. Because the
change was sudden, there was less time to plan for and track the
choices made by individual workers.
Now that remote work has become the new normal for more
companies, it is time to consider whether there are long-term
consequences to these “temporary” moves and whether
there is a need for restrictions on those who now believe they can
perform their jobs from any location in the world.
One potential mechanism for assessing the issue is to invoke the
oft-used handbook-requirement that workers keep the company
apprised of any changes to contact information. Employers may want
to recirculate that policy to ensure all are on notice that they
may face consequences for failure to abide by the policy. Employers
may also want to revise their policies to require employees to
disclose the location(s) from which they are physically performing
their work, or even to prohibit work from some locations without
obtaining prior approval.
The reason to exercise this caution is that remote work -
whether known or unknown – can unwittingly subject companies to the
complexities of multi-state employment. These complexities
encompass a wide range of legal issues, including jurisdictional,
tax, business formation, and leave issues, each with its own subset
of concerns. Indeed, wage and hour statutes alone present a host of
issues. Take for instance overtime and meal breaks. Some state
statutes provide workers with overtime and meal and rest breaks
based on where the work is performed. See McPherson v. EF
Intercultural Foundation, Inc., 260 Cal.Rptr.3d 640, 664, 47
Cal.App.5th 243, 274 (Cal.App. 2 Dist., 2020) (holding that
California’s wage laws governing nonexempt employees,
including overtime, meal and rest breaks, apply as the employee
performs work within the state). Thus, an unwitting employer could
inadvertently violate a state statute regarding rest breaks.
This issue is not limited to non-exempt employees either. Just
as states may set minimum wage rates that are higher than those
imposed by the FLSA, they may also set minimum salary levels for
exempt employees. By way of example, in 2020 the minimum annual
salary level under the FLSA is $35,568, but under New York law it
ranges from $46,020 to $58,000, depending on where the employee
works. Salaries do not need to be adjusted for periodic work
performed in a different locale. After a sufficiently long
relocation, however, an exempt employee may become subject to the
law of state where the work has been performed. There is no bright
line rule when that threshold is reached.
The same analysis extends to wage rates. Generally speaking, a
non-exempt employee is entitled to the minimum wage of the
jurisdiction where the work is performed, and some states and
municipalities require a higher minimum wage than is due under
federal law. Some jurisdictions can provide for significantly
higher rates, which many employers may not recognize as a
“minimum” wage.
In the past, this was rarely a concern. The jobs for which
remote work was permitted often paid above minimum wage, and the
location from which the work would be performed was known at the
time the arrangement was made. If work needed to be performed from
a different location with a higher wage requirement, an arrangement
could be made to change the pay rate for that time.
While most remote workers will still receive much more than the
minimum wage, there are some jurisdictions where the minimum wage
is so high that it may creep into a higher wage category and catch
an employer unaware. Moreover, the expansion of roles permitted to
work remotely coupled with worker movement in response to COVID-19
increases the potential for paying the wrong wage rate. Consider
this example: Phoenix, Arizona has one of the highest
concentrations of call center work, which was generally performed
in a busy office environment before the pandemic. Now, however,
more of this work is permitted to be performed remotely. A worker
earning the minimum wage in Arizona ($12 per hour) who moved to be
with family in California is likely entitled to the higher minimum
wage rate ($13 per hour) set by that state. If the worker moved to
one of the California municipalities with a higher rate, like Los
Angeles County ($15 per hour), it is likely that amount would be
due. See Sullivan v. Oracle Corp., 254 P.3d 237, 241, 127
Cal.Rptr.3d 185, 190, 51 Cal.4th 1191, 1197–98 (Cal. 2011)
(“California’s overtime laws apply by their terms to
all employment in the state, without reference to the
employee’s place of residence.”).
Here are some additional issues to keep in mind:
- Wage and Hour.
Multiple states have their own overtime laws that do not mirror the
Fair Labor Standards Act. For instance, in Colorado an employer is
required to pay overtime to an employee who exceeds twelve hours of
work in a work day or twelve consecutively worked hours. Thus, a
remote worker’s relocation to Colorado could create new
overtime requirements of which the employer was not previously
aware. Other issues may arise with properly recording a remote
worker’s time or permitting remote workers specific meal and
rest breaks, all of which may be dictated by state law. Employers
should have remote work policies in place to address these
concerns. Similarly, minimum wage may be an issue for some remote
workers, especially if they move to jurisdictions with a higher
than average minimum wage. - Travel Time.
Employers sometimes request that remote workers periodically return
to the office for business reasons. The employer may be obligated
to reimburse travel time and expenses if the worker has relocated
somewhere more distant. Employers should ensure that their policies
are clear on whether this travel time is reimbursable. - Final Pay. The law
regarding when an employer has to provide separated employees with
final pay varies from state-to-state and can carry fines for any
potential violations. Thus, employers must ensure that they follow
these rules for any remote workers whom they separate. - Paystubs. Some
states have specific paystub rules that employers must comply with
that outline all of the information that an employer must include
in a paystub. In some states, such as California, violations of
these rules can lead to draconian fines and present significant
liability for unwary employers. A recent decision in California,
Ward v. United Airlines, 9 Cal.5th 732 (S.Ct. Cal. June
29, 2020), held that these strict paystub rules do not apply just
because an individual performed a week of work in the state but
left open the possibility that the state might have an interest in
applying its rules to one who had been performed work there for
some longer period of time. - Employees v. Independent
Contractors. States vary in how they draw distinctions
between independent contractors and employees. Independent
contractors who work remotely may avail themselves of local rules
that make it easier to establish their status as employees entitled
to protection by different work rules. - Harassment Training.
More than one-third of the states have a law mandating sexual
harassment training, with the specific substantive requirements,
target audience, duration, and frequency varying among
jurisdictions. Connecticut, for example, requires that all
supervisory employees complete harassment training. If there are
three or more employees in the state, then obligation extends to
non-supervisory employees as well. This is in addition to the
potential for different types of harassment or mistreatment of
remote workers, and the challenges of maintaining an effective
system for reporting and investigating complaints. - Paid Sick Leave.
Some states and cities have their own sick leave laws that require
an employer to provide sick leave in excess of what it is already
providing to its employees. Indeed, such laws have proliferated in
response to COVID-19. - Venue or jurisdictional
implications. A company may find itself subject to the
venue and jurisdictional rules of any state where it employs a
remote worker. - Taxes. The
“physical presence” rule requires employers to withhold
at the rate for the state in which the work is performed, even if
the business is headquartered in another state. Some states require
withholding for both locations. As a result, a remote worker who
performs work in a state may be obligated to pay tax there and
might also create new tax withholding obligations for the
employer. - Business formation and
registered agent. If a remote worker relocates to a state
in which his or her employer was not previously doing business,
that new state may view the employer as conducting business in that
state. This could require the employer to register to do business
in that state or retain a registered agent for service in the
state. - Professional
Licenses. Professional licenses, like law licenses, can
impose state-specific requirements. To the extent an employee with
a state-specific license relocates to another state, there could be
implications with the employee’s professional license and
ability to practice in that profession. Also, it may subject the
employee to differing requirements or ethical obligations. - Benefits/Insurance for
Employees. A remote worker’s benefits or health
insurance coverage may be affected by the remote worker’s
relocation to a different state, depending on how the benefits or
health insurance is structured. - Insurance for
Employer. Similar with the concern regarding
benefits/insurance for employees, some insurance policies held by
the employer may be affected if a remote worker is working from a
state not previously contemplated, or potentially not permitted, by
the relevant insurance policy. - Data Privacy. While
remote work alone can create data privacy concerns, these issues
may be further complicated by the relocation of a remote worker.
Moreover, this becomes a much more significant concern if a remote
worker relocates to a foreign country, such as one in the European
Union, that may potentially subject the employer to differing and
unanticipated data privacy obligations. - Workers
Compensation. Given that workers compensation is
state-specific, a work-related injury for a remote worker could
create confusing and difficult issues for employers, most notably
when the employer was not aware of the employee’s relocation
to another state. - Relocation Expenses.
If an employer traditionally covers relocation expenses, it may
want to review its policies to determine how they might be read by
a remote worker who chooses a voluntary relocation to ensure there
is no ambiguity that the remote worker may be entitled to
relocation expenses.
Employers should be cognizant of these issues and take steps to
address them before they become significant problems. To do so,
employers should formulate a formal remote work policy to address
specific concerns that may arise from remote work relocation or
revise existing remote work policies to address these concerns.
Seyfarth Shaw will continue to publish content about some of the
unusual employment-related issues arising from responses to
COVID-19 to assist employers in formulating and revising these
policies and will provide a more in-depth analysis of some of the
issues raised by this checklist. In the meantime, if you have
inquiries on these topics please reach out to the authors of this
Legal Update.
Originally Published By Seyfarth Shaw, November
2020
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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