As COVID-19 cases surge again in the United States, state and local governments continue to recommend or require remote work arrangements, and some employers have already announced plans to permit remote work to continue well into 2021 and even beyond.
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. (Our colleagues have written about those issues here.) However, the remote work spurred by driven by government mandates and public health concerns in response to COVID-19 has introduced new wrinkles. Employers permitted remote work for roles that had not been granted such flexibility in the past. In addition, 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.
As remote work has become the new normal for more companies, there may be long-term consequences to these “temporary” moves, as companies become subject (perhaps unwittingly) to the complexities of multi-state employment. Wage and hour statutes alone present a host of issues.
Breaks and Overtime
Take for instance overtime and meal breaks. Many states, including California (of course) assert authority over work performed anywhere within the jurisdiction.
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.
Likewise, an unwitting employer could inadvertently fail to provide or keep records of specific meal and rest breaks required by the statute in effect where the employee has undertaken remote work. For example, in Illinois an employer is required to provide an unpaid meal break of at least 20 minutes for any employee who works a shift of 7.5 hours or more, with the break occurring within the first 5 hours of the shift.
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 possible that amount would be due under the California Supreme Court’s Sullivan v. Oracle Corp. decision.
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.
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 California Supreme Court decision, Ward v. United Airlines, 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.
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.
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.
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. (More practical reminders from our colleagues can be found here.) 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.