The Virtual Workplace: Employment Law & Tax Considerations

As of August 2020, nearly 25% of US employees reported working from home. This massive shift from office based work to remote work has a major impact from an employment law and tax law perspective, especially since employers unwittingly have found themselves with employees in several different states. This week we summarize the main takeaways from a recent discussion with the Employment Law team at Proskauer.

General Considerations:

Create a remote work policy. Train employees on how to most effectively work from home (how to use WebEx/Zoom, best practices for remote meetings, etc.) to ensure employees have the tools they need to successfully work remotely.Set regular check-ins.Ensure adequate security measures are in place.

Employment Discrimination & Harassment Considerations:

Even though employees are not physically in the workplace, remote work policies should not treat employees differently on the basis of protected characteristics. The EEOC says employers may generally not exclude employees from the workplace because they have disabilities that potentially place them at a higher risk for COVID-19. Additionally, discrimination and harassment can still occur outside of the office. This might include harassing photos or emojis over personal social media or internal communications channels like Slack. Six states and several localities require that private employers conduct discrimination and harassment training, and over a dozen recommend this type of training. The threshold (number of employees working for a company within a specific state) differs as does the training frequency, and employees working in a state other than where the employer is based could trigger a training requirement.

Other consideration include:While an employer is not obligated to furnish an employees home office, there may be an ADA obligation and employers must remain sensitive to the fact that employees may be entitled to reasonable accommodations when working remotely like special equipment to perform essential functions of their job (ex: ergonomic chair for someone with a back condition). According to the EEOC, employees who are working remotely should not be screened for COVID-19. Remote workers cannot be asked to take questionnaires, temperature checks or diagnostic tests, unless they are planning to come into the office. 

Wage & Hour Laws:

When it comes to wage and hour laws, it’s important to consider things like overtime, minimum wage, rest and meal breaks, expense reimbursement, paycheck frequency, payment of final earnings, and accrued and unused vacation. 

Overtime:
Proskauer encourages implementing policies and processes to track hours worked, especially for non-exempt employees to avoid issues where non-exempt employees claim they have worked overtime, but didn’t receive compensation for it. This might involve using electronic time sheets, or having employees email their managers at the beginning and end of their shifts. You may want to consider requiring non-exempt employees to request permission to work overtime. 

As for hours worked, Federal law (Fair Labor Standards Act) will always set the floor and applies to “work performed away from the premises or job site, or even at home”. Typically, laws of the state in which the work is being performed will govern, but courts may engage in law of analysis. If you’re a NY based employer but you have a non-exempt employee in California, you’re subject to California law with respect to daily overtime requirements. It’s important to consult counsel to ensure that you are appropriately accounting for overtime. 

Rest and Meal Breaks:
While federal law does not require rest or meal breaks, there are state laws that exist depending on the duration of a shift or duration of the work day. Some, like NY, have rest breaks required for nursing mothers. Thus it’s important to familiarize yourself with these laws pertaining to rest and meal breaks.

Expense Reimbursement:
Under Federal law, employees cannot be required to pay for business related expenses if doing so would cause the employees wage rate to fall below the minimum wage or overtime compensation thresholds. Some states to require that employers reimburse for expenses incurred while working remotely, such as California, District of Columbia and Illinois. However, employers can adopt policies around maximum amounts that would be permissible for reimbursement so that employees aren’t purchasing the top tier product that is not necessary for performing job functions. 

Paycheck Frequency:
There are requirements with respect to how often an employer must pay employees. The same goes for final paychecks. For example, if an employee is terminated in CA, they must receive final wages on their last day of employment, but this differs across states. 

Accrued and Unused Vacation:
Most states do not have laws that require the payment of accrued or unused vacation, but some states will require employers to pay this out upon an employees separation from employment. Some states consider this time to be wages and require that an employee be paid out for accrued and unused vacation time include CA, CO, CT and MA.

State and Local Leave Laws:
Some states and city leave laws specify when remote workers are covered. Some have adopted new laws with respect to paid sick leave for COVID-19. Proskauer suggests adopting policies and including them in handbooks so employees are aware.

Worker Compensation & OSHA Safety:

Workers Comp:
If an employee injures themselves while walking to grab a cup of coffee, this is not permissible. If an injury arises while an employee is holding work-related papers, on their way to file those work-related papers and they trip and fall and obtain an injury, this could be permissible.

Best Practices: Ensuring employees are working from home safely is important. Provide training or information on workstation set up (like ergonomically sufficient workspaces).Provide items like monitor, monitor stand, computer, keyboard and mouseProvide a checklist of potential hazardsDefine the employees work area and normal working hours, including breaksSpeak with your workers comp broker to ensure your policy accounts for all states where employees are working remotely. Failure to account for a state may result in a denial of coverage. 

OSHA Safety:
OSHA does not and will not perform inspections of home offices and employers are not responsible and would not be held liable for inspecting the home office of their remote employees. The only exception to this is if an employee performs manufacturing in their home, then OSHA can conduct a limited investigation if there is a complaint. 

Recording requirements still apply for work-related injuries and illnesses, even if the employee is working from home. Thus, policies should require that employees report such injuries or illnesses to their employer.

Tax Considerations:

Questions and Considerations: Like much else, individual answers will depend on individual state law. 

  1. Assuming an employer operates in only one state and normally pays tax only in that state, but now employees are living and working in different states, is the employer liable for income tax, and withholding, registration and other filing requirements in the states in which employees are now working remotely? It depends on the state. CA, MA, NJ and PA, due to COVID-19 have issued temporary guidance that during COVID-19, employers will not be liable for these things. It is important to note that this relief is only temporary and employers may be liable if employees continue to work in those states beyond COVID-19. For employees working remotely in CT, generally no. In CT, it is less about what is being done in the State (ie:working) but more consideration places on where sales or services are being rendered. For employees working in NJ/NY, employers may be liable for tax. 
  2. If an employers lives in NJ, but works in NY, but now is working remotely from NJ, can the employer reduce the NY tax withholdings? This is not recommended for CA, CT, MA, NJ, NY or PA employers. 
    Under the HEALS Act (Health, Economic Assistance, Liability Protection, and School’s Act) that was introduced by Senate Republicans in July of 2020, if an employer would not be taxable by a state but for the fact that its employees living in that state are working remotely due to COVID-19, that state could not impose any registration, taxation or other related requirements on the employer during the period beginning on the date the employee began working in that state to the date the employee returns to his or her primary work location, or, if earlier, when 90% of the employer’s permanent workforce returns to work, or December 31, 2020. (this period is the “covered period”. During the “covered period” any wages earned by an employee would be deemed to be earned at the “primary work location” of the employees (i.e., the address of the employer where the employee is regularly assigned to work), regardless of the contrary state law. 

Note that the HEROES act (Health and Economic Recovery Omnibus Emergency Solutions Acts introduced by House democrats in May of 2020 does not include these provisions. 

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