A Remote Work Policy That Ensures Employees Do Not Hop From Place to Place

CDF Labor Law LLP
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Many workplaces allow employees to work from home. However, often in those situations, the employer really does not know from where the employee is working. Recently, one of our firm’s small business clients, based in an employer-friendly state in the south, had an employee move to California without the company knowing. Neither management nor HR was aware that it had a California employee. This ended up causing some material issues when it came to daily overtime, taxes, and other issues.  

If you have employees working from home (WFH), you should strongly consider implementing a policy that provides that (a) WFH employees cannot work in another state or country for more than thirty (30) days without advanced written approval, and (b) that the exact location of all work performed remotely needs to be communicated to the HR department in writing.

There are many reasons for this:

  1. You want to know where the employee is working in case they are injured and to assist in tracking any related WFH expenses. Being injured while WFH is a workers' compensation event. In addition, you do not want to have employees who are working in an unsafe environment. 
  2. The laws of every state are different. For example, an employee working in Arizona is required to be paid overtime rates only if he or she works over forty hours in a week. If that employee moves to Nevada, he or she must be paid premium overtime rates for all hours worked in excess of eight hours in a day, even if he or she does not meet the forty-hour weekly threshold. Even within California, many cities and municipalities now have their own minimum wage and sick leave ordinances. It is difficult enough to be in compliance with applicable laws when you know where your employees work. If you do not know where your employee is working, it is virtually impossible to be in compliance with the relevant state and local laws.  
  3. If an employee is working outside of California more than occasionally, you may be able to avoid paying them daily overtime. In addition, many states do not have the onerous meal and rest period requirements dictated by California wage and hour law. Finally, your duties to reimburse employees for expenses incurred may be narrower in other states. Thus, you may be able to save significant labor costs in many instances if employees are out of state. However, if you are not made aware where they are working, you will not be able to take advantage of these potential savings.  
  4. Most other states require payroll taxes to be paid if an employee is working in their jurisdiction for more than a specified period of time. The employer may also owe income taxes to the state where the employee is temporarily working, which must be timely withheld by the employer. In our recent case where the employee moved to California without the knowledge of the employer, discussed above, this was an issue because the employer did not know the employee had moved and was not deducting payroll taxes and submitting them to the California EDD. 
  5. Other countries - particularly EU ones - may consider a resident employee to qualify for vacation, severance, and other benefits, even if the employee is not permanently residing in that country. As the employer, your company may become liable for such benefits after even 60+ days. It is important to know when your employees are working abroad for any extended period. 
  6. When there is no written policy, the employee can persuasively argue that he or she was not aware that notification was required. Having a mandatory written notification policy gives you a better likelihood that you will be timely made aware of your WFH employees’ moves to help you control labor costs and try to ensure compliance. In addition, if the employee fails to notify you, and there is a written policy requiring written notification, you will have a stronger argument that you did not willfully violate the other state's or country's laws.

Based on some interesting experiences we have seen here at CDF since WFH arrangements have become so prevalent, we recommend that California employers strongly consider adding written notification requirements to their WFH policies requiring employees to notify the employer, in writing, where they are working, if they are working somewhere new for a period of at least thirty days. In addition, employers should also have other, more traditional, provisions in their WFH policies, such as provisions addressing use and privacy of electronic devices and equipment, security of data, safety, and expense reimbursement rules. Finally, WFH employees should be required to sign documents acknowledging their notice of these policies, whenever they are issued or modified.

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