Many workplaces allow employees to work from home. However, often in these situations, the employer really does not know where the employee is working from. Recently, one of our company’s small business clients, based in an employer-friendly southern state, had an employee move to California without the company’s knowledge. Neither management nor HR were aware that she had a California employee. This ended up causing hardware issues regarding daily overtime, taxes, and other issues.
If you have employees working from home (WFH), you should seriously consider implementing a policy that states that (a) WFH employees cannot work in another state or country for more than thirty (30) days without prior written permission, and (b) that the exact location of any remote work must be communicated in writing to the Human Resources department.
There are several reasons for this:
- You want to know where the employee works in case they get hurt and help track expenses related to working from home. Being injured while WFH is a workers’ compensation event. Also, you don’t want your employees to work in a dangerous environment.
- The laws of each state are different. For example, an employee working in Arizona must be paid the overtime rate only if they work more than forty hours per week. If that employee moves to Nevada, he must be paid the premium overtime rate for all hours worked in excess of eight hours a day, even if he does not meet the forty-hour weekly threshold. Even in California, many cities and towns now have their own minimum wage and sick leave ordinances. It’s hard enough to be compliant with applicable laws when you know where your employees work. If you don’t know where your employee works, it’s nearly impossible to comply with applicable state and local laws.
- If an employee works outside of California more than occasionally, you may be able to avoid paying them daily overtime. Additionally, many states do not have the onerous meal and rest period requirements dictated by California wage and hour law. Finally, your obligations to reimburse employees for expenses incurred may be more restricted in other states. So you may be able to save significant labor costs in many cases if the employees are out of state. However, if you are not informed of where they work, you will not be able to take advantage of these potential savings.
- Most other states require payroll taxes to be paid if an employee works 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 withheld in a timely manner by the employer. In our recent case where the employee moved to California without the knowledge of the employer, discussed above, this was a problem because the employer did not know the employee had moved and was not deducting the payroll taxes and did not submit them to the California EDD.
- Other countries – especially those in the EU – may consider a resident employee entitled to vacation, severance pay and other benefits, even if the employee does not permanently reside in that country. country. As an employer, your company may become liable for these benefits even after more than 60 days. It is important to know when your employees are working abroad for an extended period.
- Where there is no written policy, the employee can make a convincing case that they were unaware that notice was required. Having a mandatory written notification policy gives you a better chance of being notified of your WFH employee moves in a timely manner to help you control labor costs and try to ensure compliance. Also, if the employee does not notify you and there is a written policy requiring written notification, you will have a stronger case that you did not knowingly violate the laws of the other state or country.
Based on some interesting experiences we’ve seen here at CDF since telecommuting arrangements have become so prevalent, we recommend that California employers seriously consider adding written notification requirements to their telecommuting policies, requiring employees to inform the employer, in writing, of the place where they work, if they work in a new place for a period of at least thirty days. In addition, employers should also include other, more traditional provisions in their teleworking policies, such as provisions relating to the use and confidentiality of electronic devices and equipment, data security, security and expense reimbursement rules. Finally, WFH employees should be required to sign documents acknowledging that they are aware of these policies whenever they are issued or amended.