We have officially passed the one-year mark since COVID-19 permeated the world, forcing employers to make quick and tough decisions about how to keep their workforces safe while preserving their ability to continue operating as productively and successfully as possible. While the transition from in-office to remote work was relatively seamless for some, it presented extreme hardships for others. Now, with over one year of remote work under many of our belts, employers have generally adapted and determined how best to achieve their goals from home. However, the challenges do not end there. Employers must now think about the legal implications of long-term remote work.
1. Employee Mobility Presents Tax and Employment Law Exposure
The COVID-19 pandemic forced millions of Americans to stop physically commuting to work and to begin telecommuting. Untethered from the physical workplace, many employees "temporarily" decamped to cities and states away from their offices. As weeks became months, and months became a year, these "temporary" relocations are now permanent for some, or continue to be indefinite for others. Employers are now faced with navigating the tax and employment law implications presented by a far-flung workforce.
Generally, states require employers to withhold payroll taxes based on where an employee performs services. Unsurprisingly, different states use different rules to determine the situs of work for employees who work in states different from that of their employer. For example, New York uses the "convenience of the employer rule," which requires employers to withhold income taxes on wages for employees who are assigned to a New York office, yet perform their services out of state for their own convenience rather than the employer's necessity. Essentially, this rule requires non-residents whose primary office is in New York State to pay New York income taxes, irrespective of where they have relocated to work during the pandemic.
Not all states use the "convenience of the employer" rule. For non-residents of California, a California employer must withhold California personal income tax and report wages paid to non-resident employees for services performed within California. However, only the wages earned in California are subject to California state income tax. During the COVID-19 pandemic, some state tax agencies, including the California State Franchise Tax Board, have waived the business nexus requirement for resident employees working temporarily from home because of the pandemic.
These examples provide a snapshot of the morass some employers must now work through for employees who have relocated remotely. As remote work continues to become more commonplace with no clear end in sight, employers must take stock of their employee work locations and the applicable state laws to ensure proper tax withholding.
State and Local Employment Law Implications
As remote employees continue to telecommute from various cities and states, employers must now comply with the potentially unfamiliar employment laws of the employee's locality. The laws of these localities often differ from those of the employer's designated office. For example, many cities and counties have passed their own local human rights laws that build on federal and state law employee anti-discrimination and anti-retaliation protections. Employers need to be mindful that the employee's relocation state and local employment laws may grant more expansive protections to employees than the employer's state provides. Whether an employer is subject to a particular state or local law may depend on how many employees the employer has within that state or locality.
Wage and Hour Law Implications
Telecommuting poses compliance challenges related to employee expense reimbursements, meal and break times, wage notices and statements, wage deductions, pay frequency, and overtime. State laws differ in their wage and hour requirements and many provide stiff penalties for non-compliance. Some states also require employers to cover all telecommuting expenses. For example, California prohibits employers from passing business operating expenses on to the employee, including, in some instances, the cost of internet service. As remote work becomes a permanent fixture of the American workplace, employers must consider wage and hour compliance in the states where employees are located or risk expensive legal disputes.
2. Continued Remote Work Presents Unforeseeable Family and Medical Leave Complications
Family and Medical Leave Laws
When a large portion of the country's workforce transitioned to remote work in March 2020, newly remote workers with parental responsibilities struggled to manage work and childcare without in-person schooling and daycare. The federal government responded with the Families First Coronavirus Relief Act (FFCRA), which provided paid leave benefits for workers forced to take leave from work for COVID-19-related reasons, including to care for a child whose daycare or school closed as a result of the pandemic.
As of December 31, 2020, employers were no longer obligated to provide FFCRA paid leave. By that time, most employers had found their footing and developed clear telework policies that resolved some of the confusion of the early days of the pandemic. Despite the expiration of the mandatory FFCRA paid leave, the U.S. Department of Labor issued guidance at the beginning of 2021 that employers could continue to provide paid leave under the FFCRA program for employees who did not exhaust such leave in 2020. Whether through an extension of FFCRA paid leave or not, many employers have continued to provide paid (or unpaid) leave to employees for legitimate pandemic-related reasons because of state law mandates or the desire to maintain a flexible approach to meet legitimate employee needs.
As employers pivot their workforces back to in-person work in larger numbers, employees are increasingly turning to legal recourse under federal, state, and local law to create headaches for employers who construe leave laws too narrowly or unthoughtfully. The national press has reported extensively on employer refusals to accommodate remote employee leave requests for childcare responsibilities due to intermittent school closures. These are often difficult issues for companies that have traditionally tried to apply leave policies consistently across the workforce. One of the major lessons learned in this pandemic is that employers must remain as flexible as possible with their leave policies for legitimate COVID-19-related leave requests.
The past year has also presented unique concerns related to reasonable accommodations requests from remote workers under the Americans with Disabilities Act (ADA). The ADA requires employers to provide qualified employees with reasonable accommodations to perform their jobs, unless the requested accommodation would cause an undue hardship on the employer. Prior to the pandemic, many employers denied employee requests to work remotely because of the view that remote work hindered productivity and disrupted business operations.
Last year, when employers made the large-scale transition to remote work, many feared that the temporary suspension of certain core functions of employees' jobs to enable remote work might result in a requirement to provide remote work accommodations indefinitely. In response to this concern, the EEOC issued guidance in September 2020 that an employer's alteration of an employee's core job duties to enable remote work in response to the pandemic did not necessarily amount to a permanent alteration of the essential job functions requiring a permanent remote work accommodation. Although this guidance leaves the reasonable accommodation standard unchanged from its pre-pandemic definition, the EEOC stated that remote work during the pandemic could be viewed as a "trial period" for a more permanent remote work accommodation. This guidance and employees' general preference for remote work will likely result in an uptick in remote work accommodation requests and disputes as employers attempt to transition ADA-qualified workers back to the workplace despite their reluctance to return.
3. Flexible Working Arrangements Can Imperil Confidential Data
One area that should be top of mind for employers is maintaining the confidentiality of private, non-public, and/or privileged information. Loss or exposure of such company data can damage an employer's competitive positioning in the marketplace, which is why companies implement confidentiality and non-competition agreements. But not all employers' agreements contemplate the types of risky scenarios that are more likely to occur because of widespread remote work.
Take the following common example. Your employee receives an email from your Finance Department containing a spreadsheet of company financial data in preparation for an internal presentation it will be making to a select group of employees. Since it would be a hassle to call your company's Technology Department to figure out how to connect his work computer to his personal home printer, your employee forwards the financial data to his personal Gmail account – which he can access on his cell phone – and prints the spreadsheet from his cell phone. Now, your company's financial data lies within your employee's personal Gmail account on his cellphone, available for easy (even if accidental) distribution to your employee's personal contacts without your knowledge. Even worse, imagine that your employee decides to work in a coffee shop because his toddler's school shut down due to a positive case of COVID-19. He connects to the coffee shop Wi-Fi and then asks the barista how to connect to the coffee shop printer. Since the process is simple enough, he prints the company financial data in the coffee shop. A client/customer calls him, he gets distracted, and he forgets about the spreadsheet in the printer. Now, the spreadsheet is free game for anyone in the coffee shop.
While the above examples could occur even when working primarily in an in-office environment, the risk level increases when we allow our employees to work more frequently from home. The key lesson learned from these types of scenarios is that companies need to revisit their confidentiality and non-competition policies and agreements and evaluate whether they are sufficiently strong to cover the added risks resulting from the proliferation of remote work.