January 1998

Workplace Labor Update - Telecommuting – January 1998

12 min

Telecommuting has become commonplace in both the private sector and government over the past decade, giving rise to a variety of new challenges for employers. "Telecommuting" is commuting to work from offsite via telecommunications equipment. Leading in the telecommuting trend are companies such as American Express, Hewlett-Packard, Pacific Bell, Sears & Roebuck, Levi Strauss, NCNB, and PepsiCo. As more employers joint these ranks, they should be aware of the legal implications of telecommuting employees.

The first step for an employer in establishing a telecommuting relationship is to develop a set of telecommuting policies and an agreement with the employee that clearly sets forth the telecommuting arrangement. In doing so, an employer must consider the implications of a telecommuting arrangement under the Fair Labor Standards Act, workers’ compensation statutes, the Occupational Safety and Health Act, and the Americans with Disabilities Act. Other concerns may include confidentiality, insurance and general management and control of the telecommuter.

Selecting Employees to Telecommute

To avoid discrimination charges, employers should develop selection guidelines for telecommuting positions just as they would for any other available positions. Telecommuting is not appropriate for every person or for every function. A person will only be suited to telecommuting if he or she is motivated enough to work alone and still get his or her job done. In addition, the functions of the job must be able to be performed without interaction in person with other individuals at the organization. Managers who make selection decisions should make their decisions on the basis of definable, nondiscriminatory factors.

Complying with the Fair Labor Standards Act

Every employer, under the Fair Labor Standards Act, is required to pay its employees for all hours it allows its employees to work. Non-exempt employees are covered by the minimum wage and overtime restrictions of the FLSA regardless of where they perform their jobs. The recordkeeping requirements of the FLSA that facilitate proper payment of employees can become particularly problematic when an hourly employee works at home. It is imperative that an employer with telecommuting workers create a mechanism that allows it to capture all time worked by non-exempt telecommuting staff members, including their overtime. One option that could be effective for clerical workers, bookkeepers or word processors, is to keep track of time through computer generated time reports that reflect hours worked and log-on times.

There is also the potential problem of telecommuters working an excessive number of overtime hours for which the employer will be obligated to pay him or her. The FLSA defines "employ" as "suffer or permit to work." Thus, an employer must compensate its employees for unauthorized work if the employer allows it or acquiesces in it. Courts have never allowed the fact that an employee works off the premises of the employer to be a defense to paying employees for all hours worked. Reich v. Department of Conservation and Natural Resources, 28 F.3d 1076 (11th Cir. 1994); Brennan v. General Motors Acceptance Corp., 482 F.2d 825 (5th Cir. 1973). Employees who work at home are no exception. See 29 C.F.R. &#sect; 785.12 (stating that the rule that work not requested but suffered or permitted is compensable "is also applicable to work performed away from the premises or the job site, or even at home"). Even if the employer’s rules prohibit excessive overtime, the employer may still be liable to the employee. The regulations are clear that "[t]he mere promulgation of a rule against such work is not enough. Management has the power to enforce the rule and must make every effort to do so." If an employer allows telecommuting, the employer bears the burden of monitoring the telecommuters’ hours and taking steps to restrict them if appropriate. It would be helpful for an employer to state in its agreement with the employee that the employee is not to work more than a certain number of hours per week unless approved in advance by his or her supervisor.

An employer also must be careful not to undermine an exempt employee’s status when creating a system for measuring the productivity of an exempt employee who telecommutes. To be exempt under the FLSA, an employee must meet the "salary basis test" which requires that the employee’s salary not be "subject to reduction because of variations in the quality or quantity of the work performed." In addition, for most exempt classifications, the employee also must maintain a certain degree of independence and decision making authority. If this balance is not maintained, the employer may compromise the employee’s exempt status under the FLSA.

Workers’ Compensation Claims

A workers’ compensation claim by an employee who telecommutes presents unique problems of proof and administration to an employer. Most workers’ compensation statutes provide for employer liability wherever the injury occurs, provided the injury occurs in the course of employment and is related to employment. See, e.g., Maryland Workers’ Compensation Statute, Md. Code Ann., Lab & Empl. &#sect; 9-101; Pennsylvania Workers’ Compensation Act, 77 Pa. C.S.A. &#sect; 411. In most work-at-home situations, there will be no witness to an accident and a question will arise as to whether the injury occurred in the course of employment. Most employers have general policies and procedures for the handling of workplace injuries which are designed to reduce fraudulent reports and prevent the same injury from happening again. Such procedures will often include making a record of the injury within a certain number of hours, inspecting the premises, and investigating. These same procedures should apply to employees who telecommute.

Complying with the Occupational Safety and Health Act

The Occupational Safety and Health Act and related state statutes require that an employer provide a workplace free from hazards that are likely to cause serious harm or injury. See 29 U.S.C. &#sect; 654. Generally, the statutory definitions of "place of employment" are broadly interpreted and may include the telecommuting employee’s home or at least part of the home. The Maryland Occupational Safety and Health Statute, for example, defines "place of employment" as "a place in or about which an employee is allowed to work." Md. Code Ann., Lab & Empl. &#sect; 5-101(g). To minimize OSHA claims, an employer should set up the employee’s home office in a safe, hazard-free manner and possibly stipulate in its agreement with the employee for periodic inspections by the employer.

Management and Control Challenges

There are several management and control challenges associated with telecommuting. One challenge is that employee productivity becomes harder to measure when the manager does not see the employee. Qualitative performance measurements are correspondingly difficult. It is possible that telecommuting will force employers to move to more objective measures of job performance. To avoid discrimination charges, it would be wise for an employer to establish objective performance standards across all job classifications in which the telecommuting arrangement exists.

Maintaining Confidentiality

Telecommuters, by their very nature, have access to their employer’s computer systems from their homes. This gives rise to concerns about an employer’s ability to protect its trade secrets and other confidential information. To ensure its confidentiality, employers may want to have telecommuting employees sign a confidentiality agreement, use passwords, and use a lock or some other device to prevent access to the telecommuter’s computer terminal.

Insurance Implications

Before entering into the telecommuting arrangement, an employer should confirm with its insurer that the insurance policies that it carries are adequate to cover telecommuting. Homeowner’s policies generally will not cover the employer’s home office equipment or the telecommuter’s services performed out of the home. The telecommuter’s agreement should impose a duty on him or her to act with reasonable care, but the employee should not be expected to assume otherwise any risk of loss or damage.

Formulating Covenants Not to Compete

Covenants not to compete are used by employers to protect interests such as confidential client lists and trade secrets. To be valid, a covenant not to compete must generally be supported by consideration and serve a validly protectable interest of the employer. In addition, it must be reasonable as to duration and geographic reach. Time and geographical limitations are used by courts to balance the interests of the employer and employee. Telecommuting relationships in nationwide and worldwide markets threaten to decrease the traditional relevance of geography. The current standard in most states is that the geographical limitations be no wider than reasonably necessary for the protection of the business while not imposing an undue burden on the employee. As employers tend toward using telecommuting employees to further worldwide business interests, it is conceivable that courts will permit covenants not to compete with national or even worldwide geographical dimensions as to these employees. C.f. Hekimian Labs v. Domain Sys., 664 F. Supp. 493, 498 (S.D. Fla. 1987) (applying Maryland law and holding that the absence of any geographical limitation was "reasonably necessary" to protect Hekimian because it was an international business); Business Intelligence Services, Inc. v. Hudson, 580 F. Supp. 1068, 1073 (S.D.N.Y. 1984) (upholding a covenant not to compete with no geographical limitations given the international nature of BIS’s business).

Complying with the Americans With Disabilities Act

The Americans with Disabilities Act prohibits discrimination against qualified individuals with disabilities. 42 U.S.C. &#sect; 12112(a). Although the ADA does not address telecommuting directly, it does require that employers make reasonable accommodations for disabled workers. 42 U.S.C. &#sect; 12112(b). When requested by a qualified employee, an employer must consider telecommuting as an option. The growing number of courts that have addressed this issue vary in their willingness to compel an employer to accommodate its employees in this manner.

Several circuits have suggested that employers are required to consider telecommuting as an accommodation for disabled employees, but each of these circuits has maintained that employers will only be expected to allow work from home under certain circumstances. In Misek-Falskoff v. IBM, 854 F. Supp. 215 (S.D.N.Y. 1994), aff’d without op., 60 F.3d 811 (2d Cir.), cert. denied 116 S. Ct. 522 (1995), the court considered the viability of working at home as an accommodation, rejecting it because it eliminated an essential function of the disabled employee’s job. The plaintiff in Misek-Falskoff suffered from a disease affecting her nervous system and requested that she be allowed to work at home. In evaluating this potential accommodation, the court observed that her request "appears at first glance to be reasonable because the employer’s business is computer research and development." Although the court ultimately rejected this accommodation as unreasonable, it did demonstrate a willingness to consider working at home to be a reasonable accommodation.

Similarly, in Langon v. Department of Health and Human Services, 959 F.2d 1053 (D.C. Cir. 1992), the court ordered a trial on the question of whether the plaintiff could perform her computer programmer job at home. The plaintiff in Langon suffered from multiple sclerosis, a degenerative neurological disorder. When she began to experience increased fatigue and weakness as a result of her disability, the plaintiff requested, among other accommodations, permission to work at home. Her employer rejected her request and the district court supported this decision, finding for the employer without a trial. Reversing the district court, the D.C. Circuit explained, "because there are genuine factual disputes about whether Ms. Langon provided HHS with sufficient information concerning the severity of her illness to invoke the department’s work-at-home policy, about whether she could have performed her job with that accommodation, and about whether letting her work at home would have imposed an undue hardship upon HHS, summary judgment should not have been granted." Langon, 959 F.2d at 1061; see also Anzalone v. Allstate Ins. Co., 5 A.D. Cases (BNA) 455, 458 (E.D. La.), aff’d without op., 74 F.3d 1236 (5th Cir. 1995) (finding for the employee because, while an employer need not allow an employee to work at home if the employee’s "productivity would be greatly reduced," the defendant did not demonstrate that the plaintiff’s productivity as a claims adjuster would be reduced if he completed his paperwork at home).

On the other hand, the Seventh Circuit has taken the position that an employer will generally not be required to accommodate a disability by allowing the employee to work at home. Vande Zande v. State Department of Admin., 44 F.3d 538 (7th Cir. 1995). In Vande Zande, the plaintiff, who was paralyzed from the waist down as a result of a tumor of the spinal cord, requested that she be provided with a desk top computer so that she could perform her job full-time from home. The court held that "[n]o jury . . . could in our view be permitted to stretch the concept of reasonable accommodation so far." The court reasoned that, in most jobs employees are required to work as a team under supervision and that "team work under supervision generally cannot be performed at home without a substantial reduction in the quality of the employee’s performance." The court went on to stress that it would need to be an "extraordinary case for the employee to be able to create a triable issue of the employer’s failure to allow the employee to work at home." Although the Seventh Circuit did take a strong stance in Vande Zande against working at home as an accommodation, the court did concede that the requirement that an employee be present to be part of a supervised team "will no doubt change as communications technology advances." See also Tyndall v. National Educ. Centers, 31 F.3d 209, 213 (4th Cir. 1994) (holding that regular attendance was essential to the plaintiff’s job so she could not be accommodated by being allowed to work at home; recognizing, however, that there may be the "unusual" case in which "an employee can effectively perform all work-related duties at home").

Because the ADA may require that an employer provide telecommuting as an accommodation for a disabled employee, it is important for employers to carefully evaluate the job held by a disabled employee to determine whether working from home is a reasonable option. If the employee is able to perform the essential functions of his or her job effectively from home and doing so would not impose an undue hardship on the employer, there may be an obligation for the employer to allow the person to telecommute. Furthermore, if the employer has a telecommuting program already in place, it may be difficult for the employer to prove that allowing the disabled employee to telecommute would be an undue hardship.

As telecommuting becomes more commonplace it will be essential for employers to consider allowing or even encouraging it in order to remain competitive in the marketplace. The employment laws will slowly adapt to recognize this new phenomenon. The laws and challenges discussed above and their successors should be carefully considered by employers before implementing or rejecting a telecommuting program.