As the labor market tightens, more businesses are considering offering remote work, or work from home, as a benefit to attract and retain talent. For some businesses, hiring remote employees can mean cutting office expenses and adding capacity while lowering overhead costs. Additionally, it can provide benefits to your employees by providing them with the trust and flexibility to meet deadlines – but, these benefits to workers carry their own set of legal implications for employers.
While working remotely can provide mutual benefits to a business and employees, here are five legal issues to consider, and address, before letting employees work remotely:
1. Wage and hour laws
While it’s easy to consider someone you hire as an employee of your business, and a remotely working employee is an employee of your company, the thing that a lot of folks forget to consider is where is that employee physically located. If they are in the same state, the potential legal issues are less than if they work for you in another state. For instance, if your e-commerce business is headquartered in Texas, but your best programmer works remotely from their home in California, there a few things that you need to be aware of when it comes to wage, hour and working environment issues.
Employment and labor laws include components such as minimum wage, overtime, exemptions, pay frequency and more vary on a state-by-state basis. Pay attention to minimum wage requirements in other states, as hiring someone that works from you in another state could mean you have to meet that state’s minimum wage. For example, the minimum wage in Texas is $7.25 per hour, while in states such as California and New York, the minimum wage is higher, at $11.00 per hour, and parts of those states have a $15.00 per hour minimum, to mention nothing of the Industrial Welfare Commission Orders in California that govern both wages, and work environment conditions depending upon your industry. If you have to comply with a higher minimum wage than your own business’s state law requires, you’ll want to consider applying the same wages for employees across the board – as differing wages for the same job duties could not only cause a blow to morale but potentially subject you to a discrimination claim.
In addition to complying with state minimum wage requirements, businesses will also need to comply with the Fair Labor Standards Act in terms of overtime requirements. This means that businesses should have proper time-keeping elements in place for remote workers and should understand that the company is responsible for unexpected overtime wages.
2. Ensure proper record-keeping, payroll, and taxes
Whether you do all the bookkeeping in the office or you outsource it to someone else, you should know the critical information to comply with each state’s regulations. Important information that may vary state-to-state could include paycheck delivery requirements, information that should appear on paystubs, deduction requirements and more.
If you decide to hire remote employees residing in states other than the one in which your business is located, taxes become slightly more complex than usual. Depending on the state in which your remote employee resides, you’ll have to adhere to that state’s law in terms of withholding unemployment and state taxes in their residing state. Now, if your employee performs remote work in their home state but also travels to your office location and works, taxes become even more complex (as if they aren’t complicated enough already) and you need to consult a tax expert to ensure you won’t be subject to an audit or penalized later on.
In addition to payroll taxes, there is the potential of your business now being subject to your remote employee’s state from an income, sales, and property tax perspective. Again, proper record keeping of this information is vital, along with working closely with your tax professional.
3. Implement security measures and privacy/confidentiality rules
While you should already have adequate IT security measures in place, along with comprehensive privacy/confidentiality rules, the need for such policies and programs rises exponentially when you add a remote employee or allow existing employees to work remotely. As you increase the number of folks accessing your company’s information from remote areas, you also increase the risk of network penetration, unintentional disclosure of sensitive data, and the potential for other cybersecurity risks. Mobile devices, wireless networks and inadvertent disclosure of personal or private data in public spaces expose your business to vulnerability.
One way to protect your business from a cyber attack is to have security policies and guidelines in place to prevent disclosing confidential client information or company information. Leaking information can lead to class-action lawsuits from clients or the public as well as hefty fines from the state.
In addition to these policies, educate your employees of potential risks whether they’re working from home or in a public space, such as a coffee shop or hotel. Consider requiring a virtual private network to secure their communication.
Businesses should make security a priority by understanding the laws that safeguard private information and implement systems to protect that information – even while employees are performing work off-site. While an employee’s home network could be vulnerable to an attack, the liability still remains with the business, who will have to face all potential consequences of a data breach. Also, having robust policies and procedures in these areas can go a long way in helping minimize any potential liability should your company’s sensitive data be hacked and customer information is accessed.
4. Providing worker’s compensation for remote employees
Just because your employee does not perform work in the company’s office does not mean they won’t be able to claim worker’s compensation – nor does it mean a business should opt out because it hires remote employees. Many courts consider home offices an extension of the workplace, meaning, if an employee is injured while performing work remotely, an employer could be held just as liable as if the accident had occurred at the office. To make it easier to separate any truly work-related claims, set clear guidelines for job duties and work hours of your remote employees.
Also, make sure that your insurance company is aware that you utilize remote employees, or allow folks to work from home so that the necessary riders are in place. Do not be surprised if your worker’s compensation carrier asks for proof of homeowners, renters, or some other type of liability coverage from your remote employee, and a waiver of subrogation rights against those policies by your employee and in favor of your comp carrier.
5. Provide electronic notices of required or accessible information
Federal, state, and even some local labor laws require businesses to display posters in the workplace outlining employee’s rights. With remote employees, it gets a little more difficult. However, employers can find alternative options to meet the posting requirements for these laws, including posting them on company intranet sites or mailing hard copies to remote employees. Just because someone is working remotely does not mean that they are not entitled to the same protections and privileges afforded those employees in your office. As was mentioned above, California issues industry-specific orders concerning wages, and work environment conditions.
With planning and foresight, your businesses can avoid these legal problems while reaping the benefits of remote working. While it is highly recommended that you create effective policies and procedures that make remote work mutually beneficial for both businesses and its employees before you begin using remote work, it is never too late to ensure that you protect your business and yourself should you employ remote workers.