Businesses contemplating moving to a virtual workplace in this post-COVID-19 world must consider the legal ramifications of such decisions. Virtual workplaces may provide businesses with many benefits, such as cost savings, access to a more geographically diverse worker pool and the possibility of more flexible employment relationships. But a virtual workplace may also include hidden employment-related issues, costs, and traps. This is especially so for California-based companies.
This article identifies some of the significant employment-law issues related to transitioning to a virtual workplace. Specifically, this article analyzes three scenarios: (1) employers seeking to have their workers continue working from home; (2) workers desiring to continue working from home — and specifically, seeking to work outside of California; and (3) the hiring of new employees.
1. Employers Transitioning to Permanent Telework
Some companies believe that teleworking may yield great benefits, and its leaders may wish to make it a more permanent arrangement. Unfortunately, most employment laws apply equally to remote work. Here are some key issues for companies to consider before making that final decision to transition to regular telework.
Employers that transition to telework must be mindful of California’s expense reimbursement requirements. California Labor Code Section 2802 provides that “An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties….” This, of course, raises a special question in the work-from-home context: what is a “necessary expenditure?” Certain items, if needed to perform the work, would likely be regarded as “necessary expenditures,” such as work computers, printers, office supplies, etc. But what about utilities, cell phones, internet access, pro-rata rent, desks, chairs, and other normal office requirements? The obligation to reimburse or provide a reasonable stipend for such items may depend upon the circumstances. So, before committing to a work-from-home arrangement, companies should consult with their employment attorneys to determine what remote expense items will likely be subject to reimbursement, and what a reasonable reimbursement would be under the circumstances.
Capturing All Time Worked
It is the employer’s obligation to keep accurate time records for all non-exempt employees, including time worked by teleworkers. Failure to do so will shift the burden to the employer to disprove the employees’ statement of the hours worked. Employers may use an electronic time system via computer or cell phone. They may have a telephone call-in and call-out procedure. Or they may rely upon the employees’ hand-written and verified timesheets, in which case employers must obtain and maintain a copy of the hand-written timesheets. Regardless of the system used, it must be accurate, and employers should document the detailed instruction and training given to remote employees as to accurate timekeeping and the consequences of employees failing to accurately log time.
Meal and Rest Breaks
Meal and rest break rules apply equally to teleworking arrangements. California employers generally must provide employees with an unpaid meal break before the completion of the employee’s fifth hour of work, and a second unpaid meal break if the employee works in excess of 10 hours. Additionally, California employers must provide employees with paid, 10-minute rest breaks for every four hours worked or major fraction thereof. Documenting these efforts is critical.
Employers must provide employees with clear, written legally compliant instructions and policies for when employees should take their meal periods, how long they should be, the manner for documenting them, and the reporting of any missed meal period. And they should have employees confirm in writing or electronically that they received these instructions and policies. As with regular timekeeping of hours, employers can use an electronic, telephonic, or hand-written time system to track unpaid meal periods, but they must maintain a copy of such record. Additionally, employers should consult with their employment lawyer as to whether to implement a reporting system in which employees are required to confirm at the end of each shift that they took or missed their paid rest breaks.
Reporting Time Pay
Another potential problem for employers with remote working non-exempt employees is the potential need to provide pay for reporting time. Reporting time pay is required when an employee reports to work, but is put to work for less than half of her scheduled workday. If this occurs, the employee must be paid for half of her usual or scheduled day’s work, with a minimum of two hours and a maximum of four hours pay.
Last year the California Court of Appeals held that employees who have to call their stores two hours before the start of their shifts to determine whether they need to work their shifts are entitled to reporting time pay. Therefore, employees may be entitled to reporting time pay even if they don’t appear for work at the employer’s business location. As absurd as it may seem, based on this decision, it’s possible that telework employees could be entitled to reporting time pay if they have to call in to ask if they are needed to work from home that day.
Working remotely may result in some employees working unscheduled or extra time, including overtime. For instance, a non-exempt employee working from home may log into his computer and respond to business email, or return a few calls on a day he is not scheduled to work, or he may work beyond scheduled hours. Employers are generally obligated to pay employees for all time that they authorized the employees to work, but they are also obligated to pay employees for all time they “suffered” or allowed employees to work that was not “authorized” in advance. To avoid paying for extra time, including unauthorized overtime, employers must give clear written direction to employees that they are only authorized to work during scheduled times, absent express permission to work beyond scheduled hours. Additionally, to avoid the contention that the employer knew from time records that the employees were working non-scheduled times, the employer must carefully monitor time records to detect any pattern of employees working non-scheduled time, and then direct the employees to stop any such practice. Employers should set firm schedules for their non-exempt employees, and instruct in writing that they are not authorized to work unscheduled hours, including overtime.
2. Workers Seeking to Telework
What happens when workers want to telework, but companies are hesitant? Employers may be required to offer telework arrangements under some circumstances. What’s more, telework may allow employers to retain (or avoid losing) some of their talent who might look for work with another employer.
Telework and Reasonable Accommodations
As businesses begin to reopen, many workers remain fearful — especially those who are immuno-compromised. Such workers may desire to continue working from home given that there is not yet an effective treatment or vaccine for COVID-19. Moreover, workers who have or develop disabilities may want to continue working from home as a reasonable accommodation. Companies must be mindful of California and federal disability laws when considering whether to allow workers with disabilities to continue teleworking.
Employers subject to state and/or federal disability laws must engage in a case-by-case interactive dialogue with the disabled employee and be willing to provide reasonable accommodations to assist the employee in performing the essential functions of the job. In the pre-COVID-19 world, companies and workers may have automatically ruled out teleworking as a reasonable accommodation. But the pandemic appears to have shown that a variety of jobs can be effectively performed remotely, now making it far more difficult for an employer to simply dismiss teleworking as unworkable.
Depending on the job and circumstances, employers will need to carefully consider whether to offer telework as a reasonable accommodation to certain disabled employees. And if they don’t, they may find themselves in the awkward position of explaining why it was reasonable during the pandemic, but not now.
Workers Desiring to Leave California?
Over the past several years, many people have left California to live in other states. People may move out of California for many reasons: housing costs, long commutes, state tax rates, or to be closer to family. Telework may serve as a boon for California employers. It makes it easier for an employer to keep a good employee who wants to move out of California.
Another potential benefit is that employers and workers can avoid some of California’s onerous Labor Code provisions. For instance, in recent years, the California courts and Legislature have made it almost impossible for companies and workers to enter into independent contractor or non-traditional working relationships. The California Supreme Court in Dynamex Operations W. v. Superior Court, 4 Cal. 5th 903 (2018) applied an almost insurmountable “ABC Test” to determine whether a worker may be classified as an independent contractor under the Industrial Welfare Commission Wage Orders. And Assembly Bill 5 (“AB 5”) applied the “ABC Test” to a determination of the relationship between workers and companies under the entire Labor Code. The courts will continue to grapple with the problem of the gig economy and non-traditional relationships, but there is no reason for optimism.
If a worker moves out of state, Dynamex and AB 5 may be inapplicable because the worker is not performing the work in California. This could open the door to some alternative arrangements for companies and workers, including independent contractor arrangements, depending upon the state law where the employee works. Additionally, there are a multitude of California wage-and-hour laws that would no longer be applicable to the employees who teleworks in another state.
Companies considering such arrangements should first consult with a California employment attorney before attempting to create legal relationships and employment agreements with workers seeking to telework from a state other than California.
3. Hiring New Workers
An obvious benefit to businesses that embrace teleworking is that they will not be limited to hiring applicants and personnel living within travel distance of their physical facilities. Rather, such businesses can obtain workers from anywhere in California, the United States, or even the world.
As noted above, there are significant benefits for employers and employees to establish employment relationships that provide for work to be performed outside of California. But, in the post-pandemic world, there may also be some obstacles. For instance, in recent weeks several localities throughout the country have begun considering “right-of-recall laws.” In fact, Los Angeles has recently passed such a law. These laws generally require companies that have laid off or furloughed workers because of COVID-19 issues to offer these workers their old jobs before hiring other workers. These right-of-recall laws may vary by locality. Los Angeles’s right-of-recall law currently applies only to airport, commercial property, event center, and hotel employers, and covers workers performing similar work at the same location before the pandemic. It has no “sunset” provision. So, if a covered employer is unable to recover to its pre-pandemic employee population until 2022, it may still have to offer workers laid off due to the pandemic their positions first before offering the position to anyone else, including someone teleworking from another state. As more localities and even states consider and pass such laws, companies — especially those with multiple locations throughout California and the United States — will need to tread carefully.
Employers must be aware of key employment law risks when considering a transition to more teleworking, or when faced with demands by employees to telework. While there are great opportunities to achieve efficiencies and cost savings, there are also many traps for the unwary.
Whether an employer is accommodating employee requests to telework, or attempting to transition to a regular telework environment, it requires careful deliberation and employment law counseling. Employers should seek guidance from an experienced employment lawyer if they wish to fully explore their options and legal obligations associated with teleworking.